JASPER’S MARKET SQUAWK 02-11-2023

<h2>Dovish FOMC Offers Relief Rally</h2>
<p>Markets cheered the unanimous FOMC decision to keep rates unchanged at a 22-year high yesterday, prompted by investors’ dovish interpretation of Fed Chair Jerome Powell’s post-meeting press conference. Treasury yields have reached a two-week low as a result.</p>
<p><img decoding="async" fetchpriority="high" class="aligncenter wp-image-26713 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/11/Untitled-design-8.png" alt="" width="1916" height="918" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/11/Untitled-design-8.png 1916w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/11/Untitled-design-8-300×144.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/11/Untitled-design-8-1024×491.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/11/Untitled-design-8-768×368.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/11/Untitled-design-8-1536×736.png 1536w" sizes="(max-width: 1916px) 100vw, 1916px" /></p>
<p><strong>Chart: GBPUSD</strong></p>
<h2>Key Factors for Today</h2>
<ul>
<li>Dovish FOMC Decision Sparks Relief Rally</li>
<li>Fed Holds Rates Unchanged to Avert Recession</li>
<li>Nasdaq Soars 2% on Fed’s Decision, Uncertainty Remains</li>
<li>Japan Announces Tax Cuts, Nikkei Continues Post-BOJ Rally</li>
<li>UK Construction Slumps Amid Rising Borrowing Costs</li>
<li>EIA Misses Build Expectations, Oil Prices Gain But Reverse</li>
</ul>
<h2>Fed Holds Rates Unchanged in Fear of Causing Recession</h2>
<p>The Fed signaled that a run-up in long-term Treasury yields reduces the impetus to raise interest rates, even as Jerome Powell left the door open to another hike to tame inflation. Powell painted a more balanced picture between doing too much and too little as FOMC members grow wary of tighter conditions that could trigger a recession. Traders in derivative markets see a 20% chance of a hike, with some speculating it could happen at the January meeting. In the meantime, Job Openings rose more than expected, while the ADP showed firms added fewer jobs, suggesting the labour market has started cooling off. The ISM Manufacturing also noted a slowdown, with New Orders falling but Prices Paid above estimates. EURUSD fell to a 2-week low near $1.05 but turned higher following the Fed’s announcement. Breaking $1.06 exposes $1.0635.</p>
<h2>Nasdaq Soars 2% But Relief Rally Comes with Uncertainty</h2>
<p>Fed’s decision to keep rates unchanged for the second consecutive meeting provided relief to equities indices, with Nasaq rising 2% to 14675. However, the lack of clarity regarding future rate hikes remained despite Powell downplaying the significance of the dot-plot guidance as he highlighted that Fed officials may revise their stance based on upcoming data. 14900 is expected resistance higher, whereas support can be seen at 14500.</p>
<h2>Japan Announces Tax Cuts, Nikkei Adds to Rally</h2>
<p>Japanese Prime Minister Fumio Kishida announced that the government will spend over 17T ($113B) to cushion the economic impact of rising inflation, which will include tax cuts. Meanwhile, the fallout from the BOJ’s decision to ditch the 1% bound for the 10-year JGB yield is still being digested by investors after the bank’s intervention. The yen has recouped some ground after hitting a one-year low, but the Nikkei has experienced its third-best day of the year, supported by the latest announcement. It surged 1.60% to 32K, summing up to a 4.5% gain since the BOJ decision, opening up 32400 next unless bulls fail to hold 31500.</p>
<h2>UK Construction Falls Amid Rising Borrowing Costs</h2>
<p>Britain’s construction sector experienced its fastest decline since the start of COVID-19 due to rising borrowing costs, according to a survey by the Royal Institution of Chartered Surveyors (RICS). The slowdown in the housing market suggests that housing supply is likely to decrease, which could worsen the challenges the BOE faces, which is running at 7% inflation. The S&amp;P 500 Manufacturing also fell to 44.8, lower than the 45.2 expected. The British Pound closed mixed against the greenback but did manage to reverse earlier losses from $1.21 to -now- $1.22.</p>
<h2>EIA Misses Expectations But Investor Focus in Mid-East</h2>
<p>Oil prices gained nearly 2.50% during Wednesday’s session to $83.50 a barrel as crude stocks rose less than expected at 0.774M vs 1.261M. The EIA report also showed that refiners restarted units more slowly than expected during seasonal maintenance. However, WTI ended up in the red as investors monitored the developments in the Middle East closer, particularly Iran’s call to halt oil exports to Israel. Global oil demand in October was also estimated to be slightly below previous projections, according to JPM, and WTI is now facing the attraction of $80. Below there lies the $79/bbl support.</p>
<h2>On The Docket</h2>
<ul>
<li>EA HCOB Manufacturing PMI</li>
<li>ECB Lane Speech</li>
<li>Challenger Jobs</li>
<li>BOE Monetary Policy Decision</li>
<li>Initial Jobless Claims</li>
</ul>
<h2>FX 1-Day Relative Performance (USD)</h2>
<ul>
<li>Aussie and Kiwi up by 0.49% and 0.62%</li>
<li>Euro 0.26% higher, Pound up by 0.21%</li>
<li>Loonie up by 0.13%, Franc 0.40% up</li>
<li>Japanese yen 0.23% higher up</li>
<li>Gold 0.32% up, Silver 1.38% in green</li>
<li>Crude and Brent 1.12% and 1.05% up</li>
<li>Natural gas in the red, down 0.83%</li>
</ul>
<p>The post <a href="https://www.keytomarkets.com/blog/analysis/jaspers-market-squawk-02-11-2023-26709/">JASPER’S MARKET SQUAWK 02-11-2023</a> appeared first on <a href="https://www.keytomarkets.com/blog">Key To Markets Blog</a>.</p>