• US stocks look to make it 8 for 8 ahead of the holidays
• UK November retail sales +1.3% vs +0.4% m/m expected
• UK Q3 final GDP -0.1% vs 0.0% q/q prelim
• Germany November import price index -0.1% vs +0.3% m/m prior
• Japan projects higher interest rates for upcoming budget for the first time in 17 years

Markets:

• CHF leads on the day
• European equities little changed; S&P 500 futures down 0.1%
• US 10-year yields down 3 bps to 3.861%
• Gold up 0.5% to $2,055.53
• WTI crude up 1.0% to $74.62
• Bitcoin down 0.7% to $43,720

Things are truly winding down in financial markets now as we approach the Christmas weekend.

Major currencies were subdued for the most part, with the dollar keeping lightly changed overall but set to end the week lower once again. USD/CHF did ease to its lowest level since 2015 as the pair looks to break the July lows of 0.8550-55.

Besides that, there wasn’t much action even with a strong beat on UK retail sales. GBP/USD is slightly higher by 0.2% to 1.2710 but nothing out of the ordinary on the day.

In other markets, bond yields continue to be pinned down while equities look like it is already in holiday mood. That being said, Wall Street is in the hunt to make it eight straight weeks of gains and look to tee up a potential upside break heading into the new year.

But for now, the festive period is going to keep things on ice in all likelihood. I wish everyone the best of holidays and a very Merry Christmas to those celebrating! Have a wonderful weekend. 🙂

This article was written by Justin Low at www.forexlive.com.

It has been a rather challenging year for oil. From talks of tighter market conditions to slowing economies across the globe, there were arguments to both sides of the story. And that is also reflected somewhat in price action, with the high for WTI crude being at $95 at the end of September before sinking back lower in the past two months as markets step up rate cuts pricing.

The fortunate thing for oil prices is that buyers have stepped up when it mattered most. At each point during the course of the year the 200-week moving average (green line) was tested, they managed to keep a defense of that. And even when things were looking rather gloomy last week, they managed to barely turn it around towards the end.

And so for this year, oil is still down over 7% but if not for the defense at the 200-week moving average seen above, it really could’ve been much worse.

So, what’s next as we move towards 2024?

The outlook is mostly leaning towards bearish side amid economic and energy-transition headwinds. As such, OPEC+ will have an important role in trying to at least keep a floor on prices with deeper production cuts. That being said, if economic conditions aren’t as bad as feared, that could still stimulate higher demand and keep the market tight. That is one consideration to be mindful about, especially since lower prices will also help to lift demand conditions in general.

This article was written by Justin Low at www.forexlive.com.

The Japanese Ministry of Finance just announced that it will cut spending for the first time in 12 years in the 2024/25 budget, as they prepare for a shift away from ultra easy monetary policy settings. The budget is estimated around ¥112 trillion, down 2% from the current year’s initial amount of roughly ¥114 trillion.

In estimating borrowing costs, the government has now assumed higher interest rates – which is the first increase in 17 years. They are projecting interest rates at 1.9%, up from the current 1.1%, and that will push the debt-servicing costs up by 7% to ¥27 trillion in the upcoming fiscal year.

This article was written by Justin Low at www.forexlive.com.

• Eurostoxx -0.1%
• Germany DAX -0.1%
• France CAC 40 flat
• UK FTSE -0.2%
• Spain IBEX flat
• Italy FTSE MIB -0.1%

The Christmas weekend is upon us, so there shouldn’t be much else to really catch traders‘ attention today. It’s shaping up to be a tepid end to the week, although US stocks will be hoping to carry on some of the recent good form to next year.

This article was written by Justin Low at www.forexlive.com.

So, what exactly does that mean? Essentially this: Paying more for less

Inflation may be coming down on paper but there remains a major divergence between what consumers are paying and what they are getting in food stores. And ultimately, that trickles down to every spending decision that households will make. If you’re having to pay more for essentials, that leaves less room for non-essential spending. Here’s the chart highlighting that divergence:

Unfortunately, this is a reality faced not just in the UK but in most places around the world. Typically, when prices go up, they don’t come back down even if the costs for the product normalises over time.

In Australia, there is growing backlash on the big jump in grocery expenditure over the last few years although that also owes to a duopoly between Coles and Woolworths. But just take a simple case of purchasing McDonald’s for example. In my country, a Big Mac meal used to cost $3.13 in 2021 but that has now increased to $4.41. That’s a ~41% price jump. And if you look all the way back to 2012, that used to cost just $1.93 (indicating a ~128% price increase).

I’m sure almost everyone can relate on this matter. And I can imagine that being the case in most countries all over the world right now. The real issue here is that no matter what picture central banks and governments are trying to sell, the wage increase of an average worker is most likely not going to cover the increase in prices for something as essential as food.

And the chart above is pretty much highlighting that. While the value of retail sales continue to increase, the trend actually shows that the volume of sales is decreasing when compared to the base level set out in 2019.

So, even with the retail sales beat we’re seeing last month, there are still concerning signs on UK retail spending heading towards the end of the year as highlighted by the CBI report yesterday here.

This article was written by Justin Low at www.forexlive.com.