JASPER’S MARKET SQUAWK 07-11-2023
<h2>Rally Starts to Show Signs of Fading</h2>
<p>Market momentum slowed down on Monday as the SLOOS report showed tighter standards and soft demand at US banks, with sentiment weighed down by higher US yields in anticipation of Treasury auctions and following doubt-producing Fed speak.</p>
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<p>Chart: GOLD</p>
<h2>Key Factors for Today</h2>
<ul>
<li>Market Momentum Slows Down as Rally Shows Signs of Fading</li>
<li>Gold Prices Dip as Fed Rate Hold Becomes Less Likely</li>
<li>Euro Area Faces Growing Risk of Recession with Weak PMIs</li>
<li>UK Data Continues to Disappoint, Pound Drops Towards $1.23</li>
<li>Weak China Demand Breaks WTI Holding Pattern Despite Upbeat Imports</li>
<li>RBA Hikes Rates, But Hawkish Outlook Takes a Backseat</li>
</ul>
<h2>Gold Falls as Chances of Fed Rate Hold Drop</h2>
<p>Fed’s Senior Loan Officer Opinion Survey (SLOOS) showed tighter standards and weaker demand persisted at US banks, with traders leaning towards a more open approach to Fed policy ahead of a series of treasury auctions starting today. Minneapolis Fed President Neel Kashkari said on Monday that it is too soon to declare victory over inflation too, whereas Gov Lisa Cook cautioned about non-bank risks. Market extractions for a Fed hold in December slid from 95.2% to 90.4%, with higher yields negatively impacting gold prices. The yellow metal lost 0.75% to $1980 an ounce Monday and remains under pressure Tuesday as it nears $1970/oz. Major support is settled at $1953/oz next, whereas resistance can be seen at $1983/oz.</p>
<h2>Weak PMIs in Euro Area Raise Risk of Recession</h2>
<p>Europe’s PMI for October showed business activity contracted at the fastest pace since November 2020, with a decline in services accelerating as new orders contracted sharply while input and output prices fell. Germany’s services sector slipped back into contraction amid weak demand, and French services activity shrank again in October. The weak economic data suggests the union’s risk of a recession is growing. Meanwhile, ECB’s Robert Holzmann warned that no rate cuts are coming any time soon. EURUSD bulls failed to get past $1.075, and rates are now nearing $1.07 early Tuesday, with further drops likely to meet support around $1.0668.</p>
<h2>UK Data Continue to Disappoint in Many Fronts</h2>
<p>The UK construction industry continued to shrink in October despite rising slightly to 45.6 as higher interest rates weighed on house builders. Subcontractor rates fell in over three years as new work dried up. Meanwhile, Barclays said that UK consumer spending grew at the slowest pace in over a year in October, with card spending only 2.6% higher than a year prior, suggesting consumers are cutting back amid higher living costs and concerns about winter fuel bills. Separate data from the British Retail Consortium showed a similar trend early Tuesday. After a weak attempt at $1.2430, GBPUSD is now heading towards $1.23, opening the door to $1.2250 under there unless bulls recapture the 1.24 round resistance.</p>
<h2>Weak China Demand Bearish Catalyst for WTI Holding Pattern</h2>
<p>China reported a deeper-than-expected decline in exports for October at -6.4% (vs -3.3 exp%), highlighting a continued slowdown in global trade, but oil imports ticked higher. Demand concerns stemming from a warmer winter and signs of a slowing economy weighed on oil prices though, outweighing the holding pattern seen from supply cut confirmations announced by Saudi Arabia and Russia around $81.50 a barrel. Fund managers have become more bearish on distillate fuel oils due to concerns about the economic outlook, especially in Europe, as well. With $80/bbl eyed next, a bounce towards $83.30/bbl could be expected unless the commodity succumbs to pressure, provoking additional bets towards $77/bbl next.</p>
<h2>RBA Hikes But Toned Down Hawkish Outlook</h2>
<p>The RBA hiked by 25 basis points overnight to 4.35% but removed language that supported a hawkish outlook on further tightening, indicating data and risks will determine if it is required. The move aims to curb inflation pressures while balancing economic growth objectives. New Governor Michele Bullock noted that inflation forecasts have been revised upwards as service sector inflation, in particular, has proven stickier than expected, and petrol prices continued to pressure inflation. Aussie fell over 1% of its Tuesday peak at 0.65, exposing 0.64 next unless bulls can de-fuel bearish momentum by taking over 0.6450 at least.</p>
<h2>On The Docket</h2>
<ul>
<li>DE Industrial Production</li>
<li>Halifax House Price Index Halifax</li>
<li>US Balance of Trade</li>
<li>Fed Barr Speech</li>
<li>Fed Jeffrey Speech</li>
<li>Fed Waller Speech</li>
<li>Fed Williams Speech</li>
<li>Fed Logan Speech</li>
<li>API Crude Oil Stock Change</li>
</ul>
<h2>FX 1-Day Relative Performance (USD)</h2>
<ul>
<li>Aussie and Kiwi 1% and 0.67% in red</li>
<li>Euro 0.13% down, Pound by -0.17%</li>
<li>Loonie 0.24% lower, Franc 0.17% down</li>
<li>Japanese yen 0.20% in negative zone</li>
<li>Gold 0.52% down, Silver lower at -1.29%</li>
<li>Crude and Brent over 1% negative</li>
<li>Natural gas barely positive at 0.03%</li>
</ul>
<p>The post <a href="https://www.keytomarkets.com/blog/analysis/jaspers-market-squawk-07-11-2023-26828/">JASPER’S MARKET SQUAWK 07-11-2023</a> appeared first on <a href="https://www.keytomarkets.com/blog">Key To Markets Blog</a>.</p>
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