JASPER’S MARKET SQUAWK 07-12-2023
<h2>Dollar Repricing Rally Continues</h2>
<p>Despite private payrolls confirming a cooling in the labour market, investors started to realise they overpriced expectations of rate cuts, offering the dollar another boost. The 10-year Treasury Yield advanced to 4.177% on growing bets fueled by the repricing of Fed cuts.</p>
<p><img fetchpriority="high" decoding="async" class="alignnone size-full wp-image-27517" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/12/Template-Daily-4.png" alt="" width="1920" height="920" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/12/Template-Daily-4.png 1920w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/12/Template-Daily-4-300×144.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/12/Template-Daily-4-1024×491.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/12/Template-Daily-4-768×368.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/12/Template-Daily-4-1536×736.png 1536w" sizes="(max-width: 1920px) 100vw, 1920px" /></p>
<p><strong>Chart: EURUSD</strong></p>
<h2>Key Factors for Today</h2>
<ul>
<li>US Private Payrolls Show Signs of Weakness Ahead of Official Data Reveal</li>
<li>BOJ’s Early Exit from Ultraloose Negative Policy Imminent?</li>
<li>Oil Prices Slide Another 4% to Now Reach Fresh June Lows</li>
<li>Deep ECB Cuts Loom as EURUSD Continues to Fall</li>
<li>BOC Changes Communication Approach to Avoid Fed-Like Implications?</li>
<li>China Turnaround Amid Export Surplus After a 6-Month Slump</li>
</ul>
<h2>US Private Payrolls Show Weakness Ahead of Official Data</h2>
<p>US private payrolls fell short of expectations in November to 103K compared to 130K expected, supporting the market’s view that the Fed is done hiking. However, a recent Reuters poll has the Fed holding rates through July, with the first cut even seen as a real rate adjustment. This pointed to a later cut and a return to the ‘higher for longer’ narrative, with the overpricing in rate cut expectations supporting the dollar through a repricing trade. The DXY reclaimed 104 and the 200-day WMA, opening the door to 104.40 next unless bulls lose 103.96.</p>
<h2>BOJ Hints to Earlier Exit From Ultraloose Policy</h2>
<p>Very recent action from Governor Kazuo Ueda and Deputy Governor Ryozo Himino helped push USDJPY down on a potential early BOJ policy shift. Himino’s hypothesis of ending negative rates was perceived as hawkish, leading investors to price a January rather than an April exit. Ueda’s arrival at Prime Minister Fumio Kishida’s office added further pressure, with Japanese bond yields rising, sending the yen towards 145.65 near the 200-day WMA.</p>
<h2>Oil In A Slippery Slope After 4% Drop to June Lows</h2>
<p>Oil prices fell for the 5th session in a row despite the EIA reporting a huge stock draw of 4.632M barrels. However, the report also showed a massive gasoline build of 4.421M versus the 1.027M forecast on the heels of record US production. With OPEC+ having a hard time enforcing its production cuts agenda, the negative factors overshadowed any glimpse of hope, sending crude 4% lower below $70 a barrel. Next down is the $66 support. Meanwhile, China’s oil imports declined 9.2% year-on-year, the first drop since April, and could weigh on demand concerns.</p>
<h2>Bets Rise for Deeper ECB Cuts, EURUSD Keeps Falling</h2>
<p>The Euro slid to a 3-week low as bets for March cuts at the ECB rose to 85%. ECB officials Francois Villeroy and Peter Kazimir offered contrasting views on the possibility of a first-quarter rate cut, but Villeroy’s shift was seen impacting the currency. Kazimir’s view was supported by a Reuters poll, which saw cuts coming in Q2, still earlier than anticipated. Furthermore, German industrial orders fell unexpectedly in October to -3.7% against expectations of a 0.2% expansion, marking the 6th bearish session.</p>
<h2>BOC Leans Hawkish to Avoid Fed-Like Implications</h2>
<p>The BOC decided to keep rates unchanged due to concerns about inflation. Despite acknowledging it is cooling, and there is an economic slowdown, the Council expressed cautiousness and preparedness about the potential impact of surging inflation in a likely bid to avoid overpricing of rate cuts as seen in the Fed’s case. The USDCAD pair dropped to 1.3550, then recoiled to the open shy of 1.36. Above there, the next resistance lies at 1.3664.</p>
<h2>China Reports Export Surplus After 6 Months</h2>
<p>China’s exports grew for the first time in 6 months in November to 0.5% from -1.1% expected, suggesting factories attract buyers through discount pricing. Hard data paints a less gloomy picture of China’s economic health than sentiment-based surveys, suggesting recent PBOC policy support has had some effect. Meanwhile, Moody’s has now moved to downgrade the outlooks for Hong Kong and Macau due to their close ties with mainland China. Japan’s Nikkei was seen trading over 1% lower early Thursday, with pressure on while it remains under 33K.</p>
<h2>On The Docket</h2>
<ul>
<li>DE Industrial Production</li>
<li>Halifax House Price Index</li>
<li>EA GDP Growth Rate (3rd Est)</li>
<li>Initial Jobless Claims</li>
<li>BOC Gov Macklem Speech</li>
</ul>
<h2>FX 1-Day Relative Performance (USD)</h2>
<ul>
<li>Aussie 0.05% down, Kiwi at -0.08%</li>
<li>Euro muted while Pound 0.04% down</li>
<li>Loonie and Franc 0.08% lower</li>
<li>Japanese yen -0.63% higher</li>
<li>Gold 0.21% down, Silver at -0.43</li>
<li>Both Crudes 0.35% in the green</li>
<li>Natural gas 0.75% in the red zone</li>
</ul>
<p>The post <a href="https://www.keytomarkets.com/blog/analysis/jaspers-market-squawk-07-12-2023-27516/">JASPER’S MARKET SQUAWK 07-12-2023</a> appeared first on <a href="https://www.keytomarkets.com/blog">Key To Markets Blog</a>.</p>
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