JASPER’S MARKET SQUAWK 21-12-2023
And Wall Street Tumbles
And finally, Wall Street fell sharply on Wednesday, with all major indexes closing lower. Investors took profits after data showed improving consumer confidence and existing home sales, somewhat staggered by Harker’s remarks. Bond yields moved higher, with the index reflecting the mood. Meanwhile, UK bond yields rose after data showed a sharp fall in inflation.
Chart: USDJPY
Key Factors for Today
- Wall Street on Profit-Taking Mode as Data and Fed Speak Create Uncertainty
- UK Inflation Surprise Sparks Rate Cut Talk, Impacting UK Bond Yields
- Oil Prices Slide After EIA Reports Significant Build in Crude Inventories
- BOJ’s Forecast of Rising Consumer Prices Sparks Speculation of Policy Shift
Dollar Rises on Wall Street Exit, Positive Data
US consumer confidence increased to 110.7 in December from 104 expected, reducing recession concerns while (seemingly) awakening worries of a too-hot economy. Existing home sales also rose to 0.8% to 3.82M units, while mortgage rates fell to 6.95%. Coupled with Philadelphia Fed President Harker’s remarks, DXY recovered towards the 102.40 area but remains in a tight range between 102 and 102.6. Among the Fed cartels who believed the Fed had down enough, Harker said that the bank is not yet done. However, it failed to trigger a notable reaction on the dollar, as he said there is no need to raise rates at the moment.
UK Inflation Triggers Early BOE Rate Cut Speculation
UK CPI inflation for November came in much lower than the expected 4.4% at 3.9% year-on-year. The surprise drop brought the chances of a BOE rate cut forward to May, with the GBPUSD pair falling below 1.2700, closing 0.75% lower to 1.2636. A move below $1.26 will expose $1.2562, whereas, on the flip side, resistance lies at $1.27. Separately, The Lloyds Bank Business Barometer fell sharply to 35% in December from 42% prior, revealing cost pressures months before wages are set to increase next April.
Oil Reverses Gains After EIA Reports Significant Build
The EIA reported a significant build of 2.9 million barrels for the week ending 15th December. Oil prices were trading higher during the release amid heightened security concerns in the Red Sea and the rerouting of shipping routes. The Bab el Mandeb strait has seen increased attacks, prompting a greater military presence in the region. However, prices reversed after the report, over 2% lower than the daily peak above $75 a barrel. While trading under the swing high, it leaves the door to $72 wide open.
Japan Inflation Revision Sparks Speculation of BOJ Shift
Japan’s Cabinet Office has forecast that consumer prices will rise by 3% in the next fiscal year, fueling speculation that the BOJ may pivot away from its loose policy and raise rates sooner. They also raised their GDP forecasts for fiscal 2023-24 to 1.6% from 1.3% prior, expecting stronger external demand and a gradual recovery at home. The USDJPY pair has dipped in Asia today on the rising speculation but faces support by the 143 barrier. The next support in focus remains the round 142, with resistance hanging by 144.13.
On The Docket
- CBI Distributive Trades
- US GDP Growth Rate
- Initial Jobless Claims
- Philly Fed Manufacturing Index
- Japan Inflation Rate
- BOJ Policy Meeting Minutes
FX 1-Day Relative Performance (USD)
- Aussie 0.28% higher while Kiwi barely on plus
- Euro 0.07% up, Pound down by mere 0.01%
- Loonie 0.11% higher, Franc lags at +0.08%
- Japanese yen 0.40% in the green zone
- Gold muted, Silver 0.35% in negative
- WTI and Brent 0.11% and 0.04% in red
- Natural gas 0.82% lower down
