JASPER’S MARKET SQUAWK 09-11-2023
<h2>Investors Move Away from Safehavens</h2>
<p>Stocks had a mixed performance on Wednesday as investors’ thirst for policy clues went in vain following the Fed Chair Powell’s mundane introductory speech. Longer-end yields slid as the $40B auction drew mediocre demand, but the rise in the 3-month yield and downplaying cuts might have weighed on gold as investors were seen dumping safehavens largely.</p>
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<p><strong>Chart: GOLD</strong></p>
<h2>Key Factors for Today</h2>
<ul>
<li>Investors Seek New Opportunities as Safehavens Lose Appeal</li>
<li>Gold Takes a Hit as Bank Officials Downplay Early Rate Cuts</li>
<li>German Inflation Cools, ECB Cuts No Near on the Horizon</li>
<li>BOE’s Bailey Steps Up Rhetoric Against Rate Cuts</li>
<li>China’s Deflationary Data Weighs on Crude Oil Prices</li>
</ul>
<h2>Gold Plummets 1% as CB Officials Downplay Early Cuts</h2>
<p>Fed Chair’s introductory speech at the Division Research and Statistics Centennial Conference offered no directional clues, with investors focusing on bonds and officials in Europe downplaying the likelihood of sooner rate cuts while holding the door open to more tightening. Along with a decay in escalation on the Mid-East front, gold plunged over 1% to $1950 an ounce to mark its third session of consecutive declines, exposing $1933 next unless an attempt towards $1970 is seen.</p>
<h2>German Inflation Cools But Too Early to Talk ECB Cuts</h2>
<p>German inflation cooled to an August 2021 low of 3.8% year-on-year in October, down from 4.5% in September but in line with expectations, while electricity prices increased by 4.7%. Bundesbank President Joachim Nagel argued that it is too early to discuss cutting rates given that inflation in the eurozone remains above 4%. European consumers raised their inflation expectations for the year ahead to 4% yesterday. Meanwhile, EA retail sales remained in contraction and missed expectations slightly but improved at -0.3% (vs -0.2 exp). EURUSD traded lower throughout the session, but a shift in dollar flows reversed the pair to $1.07. If momentum accelerates, $1.0758 is the next resistance, with support at $1.0660.</p>
<h2>BOE Pushes Back Against Raising Rate Cut Expectations</h2>
<p>BOE’s Governor Andrew Bailey pushed back against market expectations for lower rates and emphasised the need to bring inflation down to 2% through restrictive policy if needed at this speech at the Central Bank of Ireland Financial Systems Conference. It follows Chief Economist Huw Pill’s remarks that the BOE won’t fight the market’s push for lower rates of a first cut in August as investors are now pricing in three cuts next year, up from just 30bps last month. The British Pound reacted similarly to the eurodollar but failed to close in the green, down 0.13% to $1.2284 and struggling to get through $1.23. The daily low is at $1.2240.</p>
<h2>China Deflation Weighs on Crude Oil Prices</h2>
<p>China’s inflation for October showed consumer prices fell 0.2% year-over-year while producer prices declined 2.6%, in line with estimates. While China reported solid crude imports recently, the deflationary data suggest weakening demand, impacting crude prices slightly to the downside. Barclays also cut its 2024 forecast for brent on Wednesday, citing resilient US supply and higher Venezuela output, but also raised its China demand by 300K bpd. With all commodities under pressure on Wednesday, WTI lost 2% to $75 a barrel, raising speculation for additional drops to $72.70 while trading under $77.20.</p>
<h2>On The Docket</h2>
<ul>
<li>BoJ Gov Ueda Speech</li>
<li>ECB Economic Bulletin</li>
<li>Initial Jobless Claims</li>
<li>Fed Bostic Speech</li>
<li>Fed Barkin Speech</li>
<li>ECB President Lagarde Speech</li>
<li>Fed Chair Powell Speech</li>
<li>ES Consumer Confidence</li>
</ul>
<h2>FX 1-Day Relative Performance (USD)</h2>
<ul>
<li>Aussie and Kiwi up by 0.20% and 0.28%</li>
<li>Euro and pound barely make it to positive</li>
<li>Loonie and Franc slightly up and down</li>
<li>Japanese yen 0.04% higher up</li>
<li>Gold 0.20% down, Silver 1.12% in the red</li>
<li>Crude and Brent oils up by 0.15% each</li>
<li>Natural gas 0.16% higher</li>
</ul>
<p>The post <a href="https://www.keytomarkets.com/blog/analysis/jaspers-market-squawk-09-11-2023-26899/">JASPER’S MARKET SQUAWK 09-11-2023</a> appeared first on <a href="https://www.keytomarkets.com/blog">Key To Markets Blog</a>.</p>
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