• US October housing starts 1.372m vs 1.350m expected
• Fed’s Collins: I wouldn’t take additional hiking off the table
• OPEC+ sources:To consider whether to deepen oil output cuts at next meeting on November 26
• Atlanta Fed GDPNow Q4 2.0% vs 2.2% prior
• Fed’s Goolsbee: We will do whatever it takes to beat inflation
• US issues fresh Iran-related sanctions
• Fed’s Daly: Fed needs ‚the boldness to wait‘ given uncertainty
• Baker Hughes oil rig count +6 to 500
• Fed’s Collins doesn’t comment on current policy
• ECB’s Wunsch: We are in a weak form of stagflation today
• Canada PPI data for October -1.0% versus 0.4% last month and 0.2% expected

Markets:

• Gold down $1 to $1980
• WTI crude oil up $2.90 to $75.80
• US 10-year yields down 1 bps to 4.44%
• S&P 500 flat
• JPY leads, USD lags

The FX and energy markets were the lively spots on Friday as bonds and equities started the weekend early.

The US dollar continued to slide as the market firms up the belief that the Fed is done hiking and the economic data will begin to turn south. The euro was steadily bid and climbed above 1.09 for the first time since late August and finished near the highs.

Cable was strong as well as it rose to 1.2460 from 1.2375 at the start of European trading. The dollar found some bids into the London fix but quickly gave it back.

The Fed’s Collins had an opportunity to push back against market pricing but only offered up token resistance to the ’no hikes‘ narrative. The bond market chopped around and ultimately front end yields finished a tad higher with the long end down.

USD/JPY did most of its work in Asia and Europe as it fell to 149.30. It bounced slightly in North American trade but still finished the day down 110 pips.

The antipodeas all made up some ground in erasing yesterday’s losses. They were helped along by a rebound in oil.

This article was written by Adam Button at www.forexlive.com.

• S&P 500 +0.1%
• Nasdaq Comp +0.1%
• DJIA flat
• Russell 2000 +1.2%
• Toronto TSX Comp +0.6%

On the week:

• S&P 500 +2.2%
• Nasdaq Comp +2.4%
• DJIA +1.9%
• Russell 2000 +5.3%
• Toronto TSX Comp +2.6%

That’s a nice weekly gain for the Russell 2000 but it’s a long way to go to get back to the 2021 highs.

This article was written by Adam Button at www.forexlive.com.

Monday, November 20

The week kicks off with a Treasury auction of 20-year securities worth $16 billion, an event that will give us insights into market demand for long-term government debt. It comes in the aftermath of last week’s terrible 30-year sale.

Tuesday, November 21

At 8:30 AM, we’ll see the release of the Chicago Fed National Activity Index, a comprehensive measure of overall economic activity and related inflationary pressure.
Later, a 2-year Treasury note auction for $26 billion is set to occur, which could affect short-term interest rates.
The Existing Home Sales report, scheduled for release at 10:00 AM, will provide a snapshot of the health of the U.S. housing market.The Fed minutes are out at 2 PM and there’s also a 10-year TIPS sale.

Wednesday, November 22

A busy morning begins at 8:30 AM with the durable goods orders report for October, an important indicator of manufacturing health. Economists are keen to see if the consensus +3.1% rise will materialize but the main number is always the capital goods orders non-defense ex-air line.
Initial jobless claims data will also be released as well, offering the latest insights into the labor market’s strength. The first look at November UMich consumer sentiment is due at 10 AM.

Thursday, November 23

Thanksgiving Day in the United States is a holiday and a quiet day in markets.

Friday, November 24

The shortened post-holiday session includes the release of the S&P Global U.S. Services and Manufacturing PMI reports at 9:45 AM. These Purchasing Managers‘ Indexes will provide critical data on the private sector’s economic activity.

The market is sensitive to economic data right now and the dollar will trade off signs of economic strength or weakness, which can influence Federal Reserve policy decisions and market movements. Keep in mind, unexpected results from these reports can cause significant market volatility.

This article was written by Adam Button at www.forexlive.com.

Goldman Sachs provides insights into the expected monetary policy paths of the Federal Reserve (Fed) and the European Central Bank (ECB), forecasting the timelines for rate cuts and stabilization of policy rates.

Key Insights:

1. Federal Reserve Policy Outlook:
   • Hold on Rates: The Fed is expected to maintain the current federal funds rate range of 5.25-5.5% into 2024.
   • First Rate Cut in 4Q24: Goldman Sachs anticipates the initial rate cut to occur in the fourth quarter of 2024, proceeding at a pace of 25 basis points per quarter.
   • Higher Equilibrium Rate: The stabilization of the Fed funds rate is projected at a range of 3.5-3.75%, indicating a higher equilibrium rate compared to the previous cycle.

2. European Central Bank Policy Outlook:

   • End of Hiking Cycle: The ECB’s rate hiking cycle is believed to have concluded, with rates expected to remain on hold at 4.00%.
   • First Rate Cut in 3Q24: The initial reduction in rates is forecasted for the third quarter of 2024, followed by a consistent cut pace of 25 basis points per quarter until the end of 2025.
   • Policy Rate Projection: The ECB’s policy rate is anticipated to reach 2.5% by the fourth quarter of 2025.

3. ECB Balance Sheet Policy:

   • PEPP Reinvestment Limitation: Starting from the second quarter of 2024, the ECB is expected to limit Pandemic Emergency Purchase Programme (PEPP) reinvestments to EUR 10 billion per month.
   • Halting Reinvestments: A complete stop in all reinvestments is projected from the third quarter of 2024.

Conclusion:

Goldman Sachs‘ analysis suggests a cautious and gradual approach by both the Federal Reserve and the European Central Bank in unwinding their current tight monetary policies. While the Fed is expected to start easing rates in late 2024, the ECB is predicted to begin its rate cuts a bit earlier in mid-2024. Both central banks are projected to follow a measured pace in reducing rates, reflecting ongoing economic and inflationary considerations.

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This article was written by Adam Button at www.forexlive.com.