JASPER’S MARKET SQUAWK 21-09-2023
<h2>Dollar Bolstered as Fed Signals Tighter Policy</h2>
<p>The Fed kept rates unchanged but signalled more hikes this year and fewer cuts next and the year after, a tighter policy than markets had expected. The 2-year yield spiked to a 2006 high, bolstering the dollar against equities, currencies and commodities.</p>
<p><img decoding="async" fetchpriority="high" class="alignnone wp-image-25746 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/Untitled-design-98.png" alt="" width="1760" height="845" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/Untitled-design-98.png 1760w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/Untitled-design-98-300×144.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/Untitled-design-98-1024×492.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/Untitled-design-98-768×369.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/Untitled-design-98-1536×737.png 1536w" sizes="(max-width: 1760px) 100vw, 1760px" /><em><strong>Chart: GBPUSD</strong></em></p>
<h2>Key Factors for Today</h2>
<ul>
<li>Dollar Strengthens as Fed Signals Tighter Policy, Sparking Market Surprise</li>
<li>DXY Soars to March High After Hawkish Fed Signal, Dollar Momentum Maintained</li>
<li>UK Inflation Drops More Than Expected, Weighing on Pound on Rising Recession Concerns</li>
<li>WTI Crude Falls 1.50% Amidst Fed’s Hawkish Pause, Offsetting Declining Inventories</li>
<li>NZ GDP Growth Surprises with Expansion, Failing to Boost Kiwi Amid Broader Dollar Rally</li>
</ul>
<h2>DXY Soars to March High After Hawkish Fed Signal</h2>
<p>Despite the Fed keeping rates unchanged, the “dot plot” matrix showed that members supported a higher terminal rate in 2023, in the range of 5.25-5.75%. More importantly, Fed officials pointed to fewer rate cuts in 2024 and 2025 as they see inflation risks elevated, expecting growth and unemployment to improve. The hawkish FOMC sent the dollar to fresh 2023 highs that see the next resistance near 105.90. Sentiment appears to be dragging on as early Thursday has the DXY above 105.44.</p>
<h2>UK Inflation Drops More than Expected, Weighs on Pound</h2>
<p>The CPI measure of inflation in the UK fell to 6.7% from 6.8% on a 7.1% expectation, more than economists expected. The faster component also dropped faster than expected, from 0.8% forecasted to 0.3%, with both Cores marking substantial drops. Yearly Core inflation declined to 6.2% from 6.7% expected, while the monthly figure eased from 0.6% to 0.1%. Chances of another BOE hike in today’s MPC meeting were reduced by 20% after the report as some fear a fast decline may induce a recession. Coupled with a stronger dollar, the pound lost 0.40% on Wednesday and continued to descend on Thursday, reaching a May low of $1.2310. Next, support is expected at $1.2278 unless bulls can take control of $1.2353.</p>
<h2>WTI 1.50% Lower Amidst Fed’s Hawkish Pause</h2>
<p>The DoE reported that crude oil inventories fell 2.1M compared with a draw of 1.3M, suggesting stockpiles continue to deplete. Still, WTI lost 1.50% to mark the second day of declines on Wednesday as the Fed’s hawkish pause led to a higher dollar, offsetting the larger drawdown. Under $90.60 a barrel, lack of demand may inspire additional profit-taking, potentially sending prices towards the support of $87.80/bbl.</p>
<h2>NZ GDP Growth Surprise Expansion Fails to Move Market</h2>
<p>The GDP growth report late last night showed an expansion of 0.9% compared with 0.5% expected quarterly, while the yearly figure rose 1.8% versus a forecast of 1.2%. Although the yearly measure improved, it did so less than the previous data release of 2.2%, failing to push the Kiwi higher during a broader dollar rally day. The NZD/USD pair closed in the red but only slightly lower at 0.5928. Thursday morning, however, has the pair flirting with the 0.59 handle credit card spending rising, which, if lost, may open the door to 0.5888 next.</p>
<h2>On The Docket</h2>
<ul>
<li>SNB Interest Rate Decision</li>
<li>TCMB Interest Rate Decision</li>
<li>BOE Interest Rate Decision</li>
<li>Jobless Claims</li>
<li>ZA Interest Rate Decision</li>
<li>ECB President Lagarde Speech</li>
<li>Existing Home Sales</li>
<li>ECB Schnabel Speech</li>
<li>NZ Westpac Consumer Confidence</li>
<li>Judo Bank Manufacturing PMI</li>
<li>Gfk Consumer Confidence</li>
<li>JP Inflation Rate</li>
</ul>
<h2>FX 1-Day Relative Performance (USD)</h2>
<ul>
<li>Aussie down by 0.57%, Kiwi follows at -0.37%</li>
<li>Euro 0.23% lower, Pound also down by 0.19%</li>
<li>Yen lower 0.03% only, Swissy 0.11% in red</li>
<li>Canadian dollar is no exception, down 0.21%</li>
<li>Gold is 0.98% in red, Silver is down -1.68%</li>
<li>Crude and Brent down by 0.76% and 0.72%</li>
<li>Natural gas is barely up, 0.07% in green</li>
</ul>
<p>The post <a rel="nofollow" href="https://www.keytomarkets.com/blog/analysis/jaspers-market-squawk-21-09-2023-25745/">JASPER’S MARKET SQUAWK 21-09-2023</a> appeared first on <a rel="nofollow" href="https://www.keytomarkets.com/blog">Key To Markets Blog</a>.</p>
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