JASPER’S MARKET SQUAWK 04-12-2023

<h2>Gold Soars to Record High</h2>
<p>Investors leaned towards the dovish camp following Fed Chair Powell’s remarks last Friday despite reiterating possible rate hikes and premature speculation of rate cuts. US Treasury yields dropped to 4.2%, partly supported by weaker employment data seen in the ISM, sending gold to a record high. The yellow metal was subsequently pushed higher on the open on the latest developments in the Red Sea.</p>
<p><img fetchpriority="high" decoding="async" class="alignnone size-full wp-image-27444" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/12/Template-Daily-1.png" alt="" width="1912" height="911" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/12/Template-Daily-1.png 1912w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/12/Template-Daily-1-300×143.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/12/Template-Daily-1-1024×488.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/12/Template-Daily-1-768×366.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/12/Template-Daily-1-1536×732.png 1536w" sizes="(max-width: 1912px) 100vw, 1912px" /></p>
<p><strong>Chart: GOLD</strong></p>
<h2>Key Factors for Today</h2>
<ul>
<li>Record-Breaking Gold Prices Fueled by Powell’s Stance, US Data, and Red Sea Conflict</li>
<li>UK’s PMI Modest Recovery Offset Largely by Positive Housing Data Surprise</li>
<li>Eurozone’s Manufacturing Uptick Overshadowed by Villeroy’s Dovish Remarks</li>
<li>BOJ’s Wage-Inflation Challenge Evolves Amid Contrasting Expectations</li>
</ul>
<h2>Gold Higher on Fed’s JP, US Data, and Finally, Red Sea Tensions</h2>
<p>Gold prices hit record highs on Friday, buoyed by a mix of economic uncertainty and a softer US dollar following the Fed Chair’s dovish lean. Jerome Powell struck a somewhat dovish tone by saying that Fed policy is well into restrictive territory compared to just restrictive prior. This comes as US manufacturing PMI remained depressed at 46.7% in November, with ISM employment showing signs of cooling at 45.8 vs 46.8, supporting a soft landing scenario. The precious metal soared 1.8% to $2,075.6 an ounce, its highest level ever, but it received a further boost from an attack on American and UK warships on Sunday in the Red Sea, soaring past $2135 an ounce early today. It has since recoiled under $2100, marking support at $2K.</p>
<h2>UK PMI Not So Good, But Housing Data Boost Cable</h2>
<p>The UK’s CIPS manufacturing downturn showed further signs of easing as the PMI rose to 47.2 in November, indicating a modest recovery still in contraction. The British Pound ended Friday higher, but it was bolstered by a surprising rise in UK house prices reported by Nationwide, suggesting that the impact of BOE’s rate hikes might not be as severe as economists might have been expecting. The pair ticked 0.62% higher to 1.27, leaving behind support at 1.2622 and opening the door to 1.2757 next.</p>
<h2>Eurozone Data Improvement Overshadowed by Villeroy Remarks</h2>
<p>The downturn in the Eurozone’s factory activity eased slightly in November, as the PMI rose to 44.2 vs. the expected 43.1. Similarly, German manufacturing activity saw an uptick, with the PMI to 42.6 from 40.8. However, dovish comments from the Bank of France Governor, Francois Villeroy de Galhau, added to the Euro’s weakness as he supported the disinflation narrative and a quick return to the bank’s 2% target inflation. In fact, EURUSD closed the session lower on Friday despite a weaker dollar but managed to recoil most intraday losses of 1.083 to 1.088. However, it will remain under pressure while trading below $1.09.</p>
<h2>BOJ’s Wage-Driven Inflation Dilemma Appears to Evolve</h2>
<p>BOJ’s board member Asahi Naguchi warned on Sunday that Japan is yet to achieve wage-driven inflation, even as the country’s largest union seeks a minimum 5% pay rise in 2024. Meanwhile, a Reuters poll forecasts Tokyo’s core CPI growth to slow to 2.5% in November, highlighting the complexities surrounding BOJ’s policy exit scenario. The dollar was down overall Friday, with USDJPY seeing a ~1% drop to 146.71, exposing the 200 WMA at 145.50.</p>
<h2>On The Docket</h2>
<ul>
<li>DE Balance of trade</li>
<li>ECB President Lagarde Speech</li>
<li>US Factory Orders</li>
<li>Judo Bank Services PMI</li>
</ul>
<h2>FX 1-Day Relative Performance (USD)</h2>
<ul>
<li>Aussie and Kiwi 0.18% and 0.25% down</li>
<li>Euro 0.04% lower, Pound at -0.14%</li>
<li>Loonie and Franc down 0.20% each</li>
<li>Japanese yen 0.04% in the green</li>
<li>Gold 0.81% and 0.15% higher</li>
<li>Crude and Brent down 0.74% and 0.81%</li>
<li>Natural gas 3.68% into the red zone</li>
</ul>
<p>The post <a href="https://www.keytomarkets.com/blog/analysis/jaspers-market-squawk-04-12-2023-27443/">JASPER’S MARKET SQUAWK 04-12-2023</a> appeared first on <a href="https://www.keytomarkets.com/blog">Key To Markets Blog</a>.</p>