JASPER’S MARKET SQUAWK 13-10-2023

<h2>CPI Uptick Reverses Softer Fed Stance</h2>
<p>US CPI came in slightly higher than expected, raising chances that the Fed might keep rates high for longer following a week featuring dovish Fed talk from rising yields. The rise in the greenback was seen ending the recent risk rally.</p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-26238 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/Untitled-design-2.png" alt="" width="1913" height="912" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/Untitled-design-2.png 1913w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/Untitled-design-2-300×143.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/Untitled-design-2-1024×488.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/Untitled-design-2-768×366.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/10/Untitled-design-2-1536×732.png 1536w" sizes="(max-width: 1913px) 100vw, 1913px" /></p>
<p><strong>Chart: AUDUSD</strong></p>
<h2>Key Factors for Today</h2>
<ul>
<li>US CPI Uptick Raises Speculation of Prolonged High Rates</li>
<li>Rising Shelter Costs Increase Prospects of ‘High for Longer’</li>
<li>EIA Build Reverses WTI Gains From Sanctions and OPEC Optimism</li>
<li>ECB Policymakers Play Down Need For Additional Tightening</li>
<li>Aussies Plunges 1.50% on Stonger US Yields and Poor China Data</li>
</ul>
<h2>Shelter Costs Main Contributor to Longer Rates Jitters</h2>
<p>In September, US CPI data showed a slight 10bps increase in both monthly and yearly inflation rates to 0.4% and 3.7%, respectively. Although Core aligned with expectations, the likelihood of the Fed maintaining a “high for longer” approach increased due to rising shelter costs, particularly a 0.5% spike in rental costs. The dollar index soared 0.86%, pushing higher against the Japanese yen to recapture 150, sparking concerns of a BOJ intervention. 149 is expected support. Meanwhile, Initial Jobless claims came in largely in line with expectations, while on the auction front, the 30-year bond pool disappointed.</p>
<h2>Huge EIA Build Reverses WTI Gains from Sanctions, OPEC</h2>
<p>The US imposed sanctions on owners of tankers carrying Russian oil priced above the price cap of $60/bbl. It follows an oil and gas cooperation deal between Iran and Russia, presumably aiming to undermine sanctions. WTI firmed up due to OPEC’s more optimistic forecast than the IEA, but a large EIA inventory build of 10.2M bbl and OPEC’s increased production saw crude giving back nearly all gains. It closed the session at $83.50/bbl, with the next levels seen at $86 and $81.50 a barrel.</p>
<h2>ECB Policymakers Double Down on Peak Rates</h2>
<p>ECB policymakers Francois Villeroy (France) and Yannis Stournaras (Greece) expressed optimism about inflation returning to 2% without further tightening. Minutes from the last meeting showed that the bank’s models suggest that a deposit rate of 3.75 to 4% could bring inflation back to 2% if maintained for a sufficient period, implying the ECB may be done hiking. Pressured by a stronger dollar, EUR/USD ended its 6-day streak at 1.0640, with next support expected below or at $1.05.</p>
<h2>Aussies Plunges 1.50% Following US CPI, China Data</h2>
<p>A stronger dollar affected several currencies, including the Australian dollar, with rising US yields seen AUD/USD 1.5% day on Thursday. China’s CPI contributed to the drop as it fell below expectations of a 0.2% increase, falling flat. Exports also showed weakness at 6.2% versus 7.6% compared to last year, while imports have not shown a positive growth since September last year. The move from 0.6414 to 0.6313 could continue if bears take over 0.6286, with some respite towards 0.6364 possible.</p>
<h2>On The Docket</h2>
<ul>
<li>France Inflation Rate</li>
<li>Euro Area Industrial Production</li>
<li>US Trade Balance</li>
<li>ECB President Lagarde Speech</li>
<li>Fed Harker Speech</li>
<li>Michigan Consumer Sentiment</li>
<li>IMF/World Bank Annual Meetings</li>
<li>New Yuan Loans</li>
</ul>
<h2>FX 1-Day Relative Performance (USD)</h2>
<ul>
<li>Aussie 0.07% up, while Kiwi down by 0.14%</li>
<li>Euro and Pound 0.16% and 0.23% up</li>
<li>Yen at +0.12%, Franc 0.19% in the green</li>
<li>Canadian Dollar 0.06% higher</li>
<li>Gold up by 0.36%, Silver higher at 0.89%</li>
<li>Crude 1.03% higher, Brent up by 0.83%</li>
<li>Natural gas futures in the red by 0.69%</li>
</ul>
<p>The post <a rel="nofollow" href="https://www.keytomarkets.com/blog/analysis/jaspers-market-squawk-13-10-2023-26237/">JASPER’S MARKET SQUAWK 13-10-2023</a> appeared first on <a rel="nofollow" href="https://www.keytomarkets.com/blog">Key To Markets Blog</a>.</p>