JASPER’S MARKET SQUAWK 13-11-2023

<h2>Markets Bounce Back After Brief Relief</h2>
<p>US equities regained traction after a brief relief, overlooking poor consumer sentiment data, cautious remarks from Fed speakers and Moody’s US government credit rating downgrade to negative.</p>
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<p><strong>Chart: GOLD</strong></p>
<p><strong>Key Factors for Today</strong></p>
<ul>
<li>Investors Ignore Consumer Sentiment, Credit Downgrade and Fed Hawks</li>
<li>UK Economy Defies Expectations, Avoids to Slide Into Contraction in Q3</li>
<li>Lagarde Confident in Target Inflation, No Need for Further Rate Hikes</li>
<li>Oil Up on Iraq’s Support for Output Cuts, Ending 5-Day Losing Streak</li>
<li>Yen Weakens Despite Dollar’s Dip, BOJ’s Lack of Policy Exit Weighs</li>
</ul>
<h2>Investors Brush Off Moody’s US Credit Downgrade to “Negative”</h2>
<p>Michigan Consumer Sentiment declined to a 6-month low of 60.4 amidst concerns about high borrowing costs and tight credit conditions, while 10-year inflation expectations reached an annual rate of 3.2%. Moody’s cited increased risks from a lack of policy measures to address large fiscal deficits for its Friday downgrade. Despite consumer and fiscal concerns, some Fed officials believe interest rates are not restrictive enough to bring inflation back to the 2% target. Fed’s Bostic said inflation is too high and more needs to be down to bring it down, whereas San Francisco Fed President Mary Daly suggested the possibility of rate hikes if progress stalls. Still, risk appetite rose, and the markets bounced off, weighing on gold. The yellow metal dropped 1% on Friday, exposing next support at 1925 an ounce as it left behind resistance at 1958.</p>
<h2>Contrary to Analysts’ Expectations, the UK Avoids Recession</h2>
<p>The British economy stagnated in Q3 but avoided contracting on robust net imports, contrary to analysts’ forecasts of -0.1%. Despite the economic stagnation, Goldman Sachs raised the UK’s annual GDP growth forecast by ten bps to 0.6. The weak outlook has pressured Finance Minister Jeremy Hunt to introduce pro-growth measures in the upcoming budget update. The British Pound ended Fridaymuted despite a weaker dollar overall, with firmness above 1.22 likely to provoke longs towards the next resistance at 1.2262.</p>
<h2>Lagarde Says No Need to Hike More Even if Inflation Rises</h2>
<p>ECB President Christine Lagarde said euro zone inflation could tick higher in the coming months but still get it back to the 2% target without needing another hike. Lagarde warned of persistent risk and uncertainty around the lack of an agreement over a new fiscal framework in the EU. Meanwhile, Italian industrial production was flat in September, reflecting weakness in the eurozone’s third-largest economy. Eurodollar saw progress towards 1.07 but failed to reclaim the handle, leaving support at 1.0667 all exposed. If the dollar weakens more, the pair could advance to 1.0710.</p>
<h2>WTI Jumps 2.40% in Move that Ends 5-Day Streak</h2>
<p>Oil rose 2.40% on Friday as Iraq expressed support for OPEC+ output cuts ahead of a meeting in two weeks. However, it still recorded a third straight week of losses due to concerns about demand. Analysts say OPEC+ may decide to cut supply further if prices continue to fall. Moreover, US oil rig counts declined for a second week in a row, pointing to possible output reductions in the future. At 77.30 a barrel, the next logical resistance lies at 80, with support lef at 74.90. Meanwhile, Goldman Sachs lowered its Brent forecast for next year to $92 a barrel, citing increased supply. However, it said it remains optimistic about demand, expecting 2.5M bpd in 2023 and 1.6M bpd in 2024.</p>
<h2>Yen Weakness Continues to Bite Despite Dollar Drop</h2>
<p>Wholesale inflation in Japan slowed under 1% to a 2 ½-year low, suggesting cost pressures were starting to fade but provided little support for the yen. The yen has been under pressure due to rising Treasury yields recently and BOJ’s lack of commitment to exit ultra-loose monetary policy. USDJPY briefly touched 151.81 early Monday, readying itself for multiyear highs, despite a weaker dollar Friday.</p>
<h2>On The Docket</h2>
<ul>
<li>Fed Cook Speech</li>
<li>Monthly Budget Statement</li>
<li>New Yuan Lonas</li>
<li>OPEC Monthly Report</li>
<li>IBD/TIPP Economic Optimism</li>
</ul>
<h2>Fx 1-Day Relative Performance (USD)</h2>
<ul>
<li>Aussie and Kiwi up by 0.11% and 0.08%</li>
<li>Euro 0.04% higher, Pound at +0.09%</li>
<li>Loonie and Franc 0.16% down</li>
<li>Japanese yen down by 0.19%</li>
<li>Gold 0.28% up, while silver down 0.59%</li>
<li>Crude and brent 0.86% and 0.79% lower</li>
<li>Natural gas 2.7 in the green zone</li>
</ul>
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<p>The post <a href="https://www.keytomarkets.com/blog/analysis/jaspers-market-squawk-13-11-2023-26978/">JASPER’S MARKET SQUAWK 13-11-2023</a> appeared first on <a href="https://www.keytomarkets.com/blog">Key To Markets Blog</a>.</p>