JASPER’S MARKET SQUAWK 01-11-2023

<h2>Dollar Gains Ahead of Vanilla FOMC</h2>
<p>Upbeat earnings continued to drive equities higher on Tuesday, but it appears that the Treasury’s reduced borrowing didn’t have the expected impact on yields. The shorter-term yields came under pressure as the deficit projection looked at Q4, but the 10-year ended higher on the back of stronger US data.</p>
<p><img decoding="async" fetchpriority="high" class="aligncenter wp-image-26700 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/11/Untitled-design-7.png" alt="" width="1916" height="918" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/11/Untitled-design-7.png 1916w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/11/Untitled-design-7-300×144.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/11/Untitled-design-7-1024×491.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/11/Untitled-design-7-768×368.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/11/Untitled-design-7-1536×736.png 1536w" sizes="(max-width: 1916px) 100vw, 1916px" /></p>
<p><strong>Chart: EURUSD</strong></p>
<h2>Key Factors for Today</h2>
<ul>
<li>Dollar Strengthens as Treasury’s Reduced Deficit Fails to Impact Yields Much</li>
<li>Yen Plummets to 1-Year Low After BOJ Tweak, Potential Intervention Looms</li>
<li>US Hot Data Puts Pressure on Fed Chair Powell Ahead of FOMC</li>
<li>Eurozone Inflation Drops, Economy Edges Closer to Recession</li>
<li>WTI Oil Prices Slide Amidst Geopolitical Drivers and Easing Tensions</li>
<li>China’s Manufacturing Sector Contracts, Caixin PMI Falls Below Expectations</li>
</ul>
<h2>Yen Tumbles 1.80% to 1-Year Low After BOJ YCC Tweak</h2>
<p>The Japanese yen tumbled to a one-year low against the dollar following the BOJ’s decision to ditch the upper YCC ceiling to close widening rate differentials. Japan’s top currency diplomat, Masato Kanda, stated that authorities were ready to intervene to address any sort of excessive moves, but nothing so far. USDJPY will likely remain biased up while trading above 150.80 and the 150 round support, exposing 33-year highs past 152.</p>
<h2>Hot US Data Likely to Weigh on the Fed Chair’s Tone</h2>
<p>US consumer confidence dropped to a five-month low in October, but it beat estimates of 100 to 102.6, adding to a series of hot US prints released in the past few weeks that JP has to deal with. Last month’s CC was also revised upward from 103 to 104.3. Meanwhile, employment costs unexpectedly accelerated in Q3, pressuring the Fed to maintain high rates until inflation is notably lower. The 10-year rose 0.86%, sending the US index 0.50% higher to 106.70 and leaving behind support at 106.32.</p>
<h2>Europe Closer to Recession, But Inflation Drops Fast</h2>
<p>Eurozone inflation dropped from 4.2% to 2.9% in October compared with expectations of 3.1%, primarily attributed to base effects from energy’s spike last year. However, the economy contracted by 0.1% in Q3, potentially leading to a recession. ECB’s Joachim Nagel emphasized the need to avoid premature easing as the bank has effectively reduced interest rates by just keeping at it. The European currency was trading up near $1.0675 but reversed to end 100 pips lower against the greenback, closing at $1.0574 and bringing $1.05 into focus.</p>
<h2>WTI Drops 1.50% from Geopolitical Drivers, Eyes $80</h2>
<p>During its Cabinet meeting last week, Iraq agreed to increase crude oil exports to China by 50% and its daily production capacity of the Rumaila oil field in a blow to the US for its influence in the Middle East. Despite a better-than-expected API build (1.35M vs 1.6M), oil traded lower in Tuesday trading, weighed by easing tensions in Gaza after Hamas pledged to release several hostages following a deadly strike at a refugee camp and a call for a “general cease-fire” from international powers. Losing the round support at $80 could instigate further pain towards $79.30 a barrel unless bulls reclaim $82.50.</p>
<h2>China’s Caixin Confirms Contraction Seen in Manufacturing</h2>
<p>China’s unofficial Caixin manufacturing PMI fell to 49.5 in October, marking the first contraction since July and missing analysts’ forecasts at 50.8. Manufacturing conditions deteriorated due to weak foreign demand, and business confidence for the year ahead is not expected to improve. USDCNY rose 0.22% to 7.34, with a break of 7.3470 opening the door to 7.3683.</p>
<h2>On The Docket</h2>
<ul>
<li>GB Nationwide Housing Prices</li>
<li>ADP Employment Change</li>
<li>JOLTs Job Openings</li>
<li>ISM Manufacturing PMI</li>
<li>EIA Crude Oil Stock Change</li>
<li>Fed Interest Rate Decision</li>
<li>Fed Press Conference</li>
</ul>
<h2>FX 1-Day Relative Performance (USD)</h2>
<ul>
<li>Aussie 0.10% down, Kiwi 0.29% in red</li>
<li>Euro 0.05% lower, Pound down by 0.14%</li>
<li>Loonie is down by 0.05%, Franc at +0.09%</li>
<li>Japanese yen 0.23% higher up</li>
<li>Gold 0.43% lower, Silver 1% in red</li>
<li>Crude 0.28% up, Brent at +0.15%</li>
<li>Natural gas 0.39% higher</li>
</ul>
<p>The post <a href="https://www.keytomarkets.com/blog/analysis/jaspers-market-squawk-01-11-2023-26696/">JASPER’S MARKET SQUAWK 01-11-2023</a> appeared first on <a href="https://www.keytomarkets.com/blog">Key To Markets Blog</a>.</p>