JASPER’S MARKET SQUAWK 02-10-2023

<h2>PCE Reverses Inflation Narrative, No Gov Shutdown</h2>
<p>Friday saw markets close on a mixed footing despite easing inflation in the US and EU due to rising uncertainty from a weekend government shutdown and China’s market closure. Lawmakers averted shutting the US government down over the weekend by passing legislation to extend funding through November 17.</p>
<p><img decoding="async" fetchpriority="high" class="alignnone wp-image-26053 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/Untitled-design-8.png" alt="" width="1917" height="915" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/Untitled-design-8.png 1917w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/Untitled-design-8-300×143.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/Untitled-design-8-1024×489.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/Untitled-design-8-768×367.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/Untitled-design-8-1536×733.png 1536w" sizes="(max-width: 1917px) 100vw, 1917px" /></p>
<p><strong>Chart: GOLD</strong></p>
<h2>Key Factors for Today</h2>
<ul>
<li>PCE Reverses Inflation Narrative But Offers Little Change in Market Direction</li>
<li>Gold Slides Despite Falling PCE, Risk Appetite Rises after Shutdown Avoided</li>
<li>Eurozone Faces Recession Concerns as Inflation Falls, ECB Hike Worries Persist</li>
<li>WTI Down Over 1% as Production Concerns, China, US Shutdown Weigh on Prices</li>
<li>UK GDP Revision Reflects Some Optimism, But Challenges Remain Ahead</li>
</ul>
<h2>Gold Slides for 5th Straight Session Despite Falling PCE</h2>
<p>US PCE data for August eased, with core PCE falling to 3.9% for the first time in two years. The monthly figure slowed only by ten bps more than projected at 0.1%, but the yearly core aligned with expectations, keeping Treasury yields elevated and weighing on gold. The metal closed 0.88% lower despite initially spiking to $1880 an ounce, with the 11th-minute government shutdown now avoided increasing risk appetite and probabilities towards $1830. Meanwhile, UAW strikes continue despite a recent agreement with Mach Trucks.</p>
<h2>EA Inflation and German Retail Sales Below Expectations</h2>
<p>Inflation in the Euro Area fell largely below economists’ estimates, with the yearly core sliding from 4.8% exp to 4.5% and the monthly component from 4.5% exp to 4.3%. Despite the drop, the eurozone is still dealing with recession concerns (France shows deflation), and investors worry the sharper fall won’t stop the ECB from hiking. German Retail Sales released earlier on Friday showed Europe’s economic heart is still dealing with contractions, with the monthly print falling to -1.2% while 0.3% expected. European yields fell, driving the eurodollar above $1.06, but the pair ended up closing marginally higher at $1.0574, keeping $1.05 as major support to look out for and resistance at Friday’s top.</p>
<h2>WTI Down Over 1%, Weighed by Production Worries</h2>
<p>According to a survey by the Federal Reserve Bank of Dallas, oil and gas activity has been on the rise, with the EIA showing production levels hitting a November 2019 high. Concerns around China’s property market, a US shutdown and increasing rumours of a US-SA military security deal all weighed on WTI on Friday, sending the black gold over 1% lower to put in a 2-day decline to $90 a barrel. Additional selling could see prices slide as low as $88 unless bulls attempt to recapture the peak of $95.</p>
<h2>UK GDP Revision Optimistic, But Pressure Builds on BOE</h2>
<p>GDP Growth in the UK was revised higher on all fronts, reflecting better estimates of business investments, retailer margins, and healthcare sector costs and output. The yearly rate saw an upward revision from 0.2% to 0.5%, but the UK economy lags behind other majors. The upward revisions may help explain persistent inflation and the tightness of the labour market while adding to the risk of further hiking. Cable had a somewhat mixed performance on Friday, with all gains lost by the day’s end and weakness under $1.22 cropping in early Monday. $1.21 is expected support and $1.2270 resistance.</p>
<h2>On The Docket</h2>
<ul>
<li>UK Nationwide Housing Prices</li>
<li>HCOB Manufacturing PMI</li>
<li>UK S&amp;P Global/CIPS Manufacturing PMI</li>
<li>S&amp;P Global Manufacturing PMI</li>
<li>ISM Manufacturing PMI</li>
<li>Fed Chair Powell Speech</li>
<li>Fed Harker Speech</li>
<li>Fed Barr Speech</li>
<li>Fed Williams Speech</li>
</ul>
<h2>FX 1-Day Relative Performance (USD)</h2>
<ul>
<li>Aussie and Kiwi down by 0.51% and 0.28%</li>
<li>Euro 0.11% lower, Pound down by 0.20%</li>
<li>Yen and Franc 0.24% and 0.11% down</li>
<li>Canadian dollar pressured by 0.14%</li>
<li>Gold 0.5% down, Silver 2.36% in red</li>
<li>Crude and Brent up by 0.1% and 0.07%</li>
<li>Natural gas 1.23% lower</li>
</ul>
<p>The post <a rel="nofollow" href="https://www.keytomarkets.com/blog/analysis/market-analysis/jaspers-market-squawk-02-10-2023-26052/">JASPER’S MARKET SQUAWK 02-10-2023</a> appeared first on <a rel="nofollow" href="https://www.keytomarkets.com/blog">Key To Markets Blog</a>.</p>