JASPER’S MARKET SQUAWK 17-05-2023
Gold Slides Under $2k on Hawkish Fed Official
The dollar drifted higher against a falling stock market, despite Retail Sales coming in below expectations as the underlying trend remains solid. Fed’s Mester added to the hawkish narrative from Monday. Gold broke back below $2,000/oz.
Chart: XAUUSD
Key Factors for Today
- Gold slides below $2k as hawkish Fed official signals delay in rate cuts
- US retail sales fall short, but the underlying trend remains steady
- Canada experiences a reversal in the inflation trend
- UK jobs data sends Cable under $1.25 with jobless claims nearly doubling
- Japan’s GDP surprises to the upside, contributing to USD/JPY’s fourth consecutive rise
Interest Rate Cuts May Be Delayed, Says Mester
US retail sales rose less than expected, but the underlying trend remained intact, offering the dollar a helping hand and leading gold to a 1.10% drop. Hawkish remarks from Fed’s Loreta Mester suggesting the possibility of delayed interest rate cuts were the primary mover, though, as Fed officials had made hawkish comments on Monday. Gold has major support at $1970/bbl if bulls fail to reclaim the $2k handle.
Minimal Macro Keeps Focus on Debt Ceiling
A meeting between House Speaker Kevin McCarthy and US President Joe Biden was inconclusive, but both sides expressed optimism about reaching a deal as discussions continue. Reportedly, US Treasury Secretary Janet Yellen sent a memo to Congress saying the debt ceiling would be hit at the start of June. EUR/USD traded marginally lower but aligned with Monday’s 50-pip short range.
Canada CPI Up for First Time in 10 Months
April CPI change for Canada came in at 0.7% compared to the 0.4% expected, with the annual rate at 4.4% compared to the 4.1% expected. The reversal in the inflation trend got extra notice, given that the BOC had paused previously. Loonie traded as low as 0.47% to $1.34, but this trend also reversed on a stronger dollar, bringing $1.3537 back in focus.
UK Jobs Data Sends Cable Under $1.25
Jobless claims in the UK nearly doubled compared to the prior month, contrasted with an expected drop. The claimant count rate rose to 4.0% compared to 3.9% prior, and the unemployment rate ticked up to 3.9% from 3.8% prior. The alarming data release sent the pound 0.35% lower to $1.2485, with 43 paving the way to $1.24. $1.2550 may act as resistance.
Japan GDP Surprises to the Upside
Q1 GDP for Japan on a seasonally adjusted basis rose 1.6% compared to the 0.8% expected, supporting the stock market and contributing to weakness in the yen. The data seen increasing the chance of snap elections after Topix hit a thirty-year high due to better earnings and increased buybacks. USD/JPY rose for the 4th consecutive session, but momentum appears exhausted, shy of 137.00.
On The Docket
- EA Inflation Rate
- ECB Panetta Speech
- US Building Permits
- US Housing Starts
- EIA Crude Oil Stocks Change
- ECB Guindos Speech
Fx 1-Day Relative Performance (USD)
- Aussie is 0.21% lower, while Kiwi is up by 0.05%
- Euro is 0.04% lower, but the pound is down by 0.14%
- Loonie and Franc 0.06% and 0.04% down
- Japanese yen down by 0.31%
- Gold is up by 0.04%; silver is down by -0.05%
- Crude and brent down by 0.53% and 0.58%
- Natural gas is down by 1.35%
