JASPER’S MARKET SQUAWK 03-11-2023
<h2>Risk-On Persists on Growing Peak-Rate Rhetoric</h2>
<p>Bond yields slumped after investors cheered signs that central banks may be nearing the end of their aggressive rate hike cycles after both FOMC and BOE paused this week. Wall Street saw its best day in six months, partly supported by strong earnings, as the 10-year dropped to 4.668%.</p>
<p><img decoding="async" loading="lazy" class="aligncenter wp-image-26728 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/11/Untitled-design-9.png" alt="" width="1916" height="918" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/11/Untitled-design-9.png 1916w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/11/Untitled-design-9-300×144.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/11/Untitled-design-9-1024×491.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/11/Untitled-design-9-768×368.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/11/Untitled-design-9-1536×736.png 1536w" sizes="(max-width: 1916px) 100vw, 1916px" /></p>
<p><strong>Chart: GBPUSD</strong></p>
<h2>Key Factors for Today</h2>
<ul>
<li>Investors Praise Pause in Rate Hikes, Bond Yields Slump</li>
<li>S&P 500 Soars on ‘Dovish Pause’, Jobs Report to Determine Sentiment</li>
<li>BOE Holds Rates at 15-Year High, Hawkish Dissent Sparks Pound Rally</li>
<li>ECB Optimistic for Soft Landing Despite Challenges</li>
<li>WTI Ends Losing Streak Amidst Risk-On Environment, But Concerns Loom</li>
</ul>
<h2>S&P Continues End-of-Rate Winning Streak, Up 1.80%</h2>
<p>Despite Apple’s Q4 sales disappointing tech, the S&P 500 had its best session since April on Thursday, supported by falling yields. The Fed hinted at no end in sight for rate hikes on Wednesday, but still, it was seen as a “dovish pause” and US equities rose. 52% of traders expect a “risk-on” jobs report, pointing to the UAW strikes. Unemployment Claims (210K vs 208K) and Nonfarm Productivity (4.7% vs 4.3%) supported the notion of a soft landing and the end of the Fed’s hiking cycle. The 500 index locked a 4-day strike in, up nearly 5% this week, eying 4380 next unless bulls lose 4280.</p>
<h2>BOE Pauses at 15-Year High, But a “Hawkish Pause”</h2>
<p>The BOE kept interest rates at 5.25% at their November meeting yesterday but signaled rates would remain high for an extended period to combat high inflation. While Governor Andrew Bailey acknowledged risks from higher energy prices and that the economy is close to a recession with little growth expected in the coming years, he noted inflation is forecast to remain above target through 2025. The votes showed a hawkish dissent as three MPC members voted for a 25bps hike. The British Pound rose some 0.45% against the buck but failed to recapture $1.22, increasing the risk of falling black to $1.2150. Pivoting higher could pave the way to $1.2290.</p>
<h2>ECB’s Lane Believes the EU Can Achieve Soft Landing</h2>
<p>ECB’s chief economist Philip Lane said yesterday that there is a “good case” for a soft landing despite tightening credit conditions. But, he also warned that a “new energy shock” from higher oil and gas prices could pose a risk to the eurozone’s outlook. Wage growth in the eurozone has been falling, but Lane thinks this is a good sign that inflation will return to the ECB’s 2% target by 2025. Meanwhile, European PMIs showed weakness, with French, Italian, and Spanish Manufacturing down big. EURUSD traded at nearly 1% up Thursday but closed 0.50% higher only, above $1.06. Maintaining short-term support could expose $1.0686, while losing the floor may reverse the impact towards $1.0568.</p>
<h2>WTI Ends 3-Day Slossing Streak, But Risks Could Still Weigh</h2>
<p>WTI rose 1.76% amidst a risk-on environment as Saudi Arabia is expected to extend its voluntary oil output cut of 1M bpd through December. Venezuelan exports also fell 19% despite the recent easing of sanctions, and China’s Caixin Services activity picked up a bit (50.4 VS 50.2). However, concerns about supply disruptions in the Middle East and weak demand from China following NBS and Caixin Manufacturing PMI contractions in October could weigh on prices, increasing speculation for a drop back to $80 a barrel. If bulls can reclaim $83.60/bbl, the commodity could advance past $85/bbl.</p>
<h2>On The Docket</h2>
<ul>
<li>UK S&P Global/CIPS Services PMI Final</li>
<li>EA Unemployment Rate</li>
<li>Fed Barr Speech</li>
<li>CA Employment Change</li>
<li>Nonfarm Payrolls</li>
<li>S&P Services PMI</li>
<li>ISM Services PMI</li>
<li>Fed Barr Speech</li>
</ul>
<h2>FX 1-Day Relative Performance (USD)</h2>
<ul>
<li>Aussie and Kiwi up by 0.06% and 0.13%</li>
<li>Euro 0.11% up, Pound follows at 0.03%</li>
<li>Loonie largely flat, Franc up by 0.08%</li>
<li>Japanese yen 0.08% in the plus</li>
<li>Gold 0.05% up, while Silver 0.27% down</li>
<li>Crude and Brent up by 0.4% and 0.29%</li>
<li>Natural gas in the green, up 1.73%</li>
</ul>
<p>The post <a href="https://www.keytomarkets.com/blog/analysis/jaspers-market-squawk-03-11-2023-26727/">JASPER’S MARKET SQUAWK 03-11-2023</a> appeared first on <a href="https://www.keytomarkets.com/blog">Key To Markets Blog</a>.</p>
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