Sooner:

• JPM expect the first rate cut in June, having previously expected the first in September.
• the ECB ho hold in July
• and then cuts in both September and October

Deeper:

• JPM expect a total of 100bps in cuts, having previously expected 75

Analysts at the firm are wary of the trend in core inflation, saying its recent slowing may be the result of the dissipating of transitory factors and making the trend difficult to discern:

• They point to stronger wage data as a factor that cause some inflation „stickiness“.
• Say that the disruption to shipping due to Red Sea attacks could also add to pressure for higher inflation

***

JPM are calling the first ECB rate cut later than many other analysts are. Market pricing is for the April meeting (see below).

***

The ECB dates to watch this year:

This article was written by Eamonn Sheridan at www.forexlive.com.

• US January UMich prelim consumer sentiment 78.8 vs 70.0 expected
• US existing home sales for December 3.78M vs 3.82M estimate
• Canada November retail sales -0.2% vs 0.0% expected
• Fed’s Daly: It’s premature to think rate cuts are around the corner
• Feds Bostic: Wants to make sure inflation is on way to 2% before cuts
• Fed’s Goolsbee: If we make good progress on inflation, we need to factor that into rates
• Baker Hughes oil rig count -2 to 497
• Atlanta Fed GDPNow growth estimate for Q4 remains at 2.4%

Markets:

• S&P 500 up 59 points to all-time high close of 4839
• CAD leads, GBP lags
• Gold up $6 to $2028
• US 10-year yields down 1.4 bps to 4.13%
• WTI crude oil down 26-cents to $73.82

The big news was in the stock market where the S&P 500 broke through the 2021 intraday high. That’s certainly not a move that looked like it would happen early on as the market showed middling gains but steady bids starting at lunchtime in New York continued until late in the day.

The turn in equities weighed on the US dollar on most fronts. Cable climbed to 1.2702 from 1.2660 and the euro rose 25 pips to 1.0894.

In general, the dollar fell 20-30 pips across the board after earlier strengthening. One notable move was in the Canadian dollar, which strengthened despite a $1 intraday fall in oil. Canadian retail sales were poor in November but the December advanced number was better and that was enough to reverse some of the recent loonie losses. USD/CAD finished the week down 56 pips to 1.3427.

USD/JPY has been the story of the past month but it took a break today. It rose to 148.50 early in New York trade but sagged back to unchanged at 148.11 on the day.

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

• Highlights improving consumer sentiment data (likely today’s UMich report)
• I’ve heard cautious optimism on economy
• I see inflation coming down
• Policy is in a good place
• We’re in a great place with policy and the economy and we can start to be more patient to see what we need to do next
• We don’t want to solve the inflation problem by taking people’s jobs away
• We don’t want to loosen policy too soon
• The job this year is about calibration
• Goods prices inflation is coming down and services prices are coming down
• There is a purposeful march towards normalization
• Cyclically we’re getting to a better place

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

For the week, the major indices all closed higher for the 2nd consecutive week after sharp declines in week 1 of the 2024 trading year.

The final numbers are showing:

• Dow Industrial Average rose 395.19 points or 1.05% at 37863.83
• S&P index rose 58.87 points or 1.23% at 4839.82
• NASDAQ index rose 255.31 points or 1.70% at 15316.96

Small-cap Russell 2000 got involved as well with a 20.73 point rise or 1.08% at 1944.39.

For the trading week, the major indices all closed higher led by the NASDAQ points again:

• Dow Industrial Average +0.72%
• S&P index rose 1.17%
• NASDAQ index rose 2.26%

For the first 3-weeks of the new trading year, all three major indices are now up on the year:

• Dow Industrial Average is up 0.46%
• S&P index is up 1.47%
• NASDAQ index is up 2.0%

How are the Magnificent 7 doing in the first three weeks of the trading year?

• Nvidia up 20.15%
• Meta-+8.33%
• Apple -0.51%
• Alphabet +4.79%
• Microsoft +6.02%
• Amazon +2.23%
• Tesla -14.60%

Next week, the earnings for the fourth quarter start to kicking with some large-cap movers. Below is a sampling of some of those earnings releases:

Monday, January 22

• United Airlines
• Logitech

Tuesday, January 23

• Verizon
• 3M
• GE
• Johnson & Johnson
• Halliburton
• Procter & Gamble
• Netflix
• Intuitive Surgical
• Texas Instruments

Wednesday, January 24

• AT&T
• Tesla
• IBM
• servicenow
• Lam Research

Thursday, January 25

• American Airlines
• Southwest Airlines
• Dow
• Intel
• Visa
• T-Mobile

Friday, January 26

• American Express
• Colgate-Palmolive

Looking at next week’s economic calendar, key events and releases include:

Tuesday:

• Bank of Japan interest-rate decision

Wednesday:

• New Zealand CPI quarter on quarter 0.5% expected reaches 1.8% last quarter
• Germany, France, UK flash manufacturing and services PMI data
• Bank of Canada interest-rate decision. No change expected
• US flash manufacturing and services PMI

Thursday

• ECB rate decision. No change expected
• US advanced GDP. 2.0 expected. Atlanta Fed GDPNow estimate 2.4%
• US unemployment claims

Friday

• US PCE data

This article was written by Greg Michalowski at www.forexlive.com.

Governor Pan Gongsheng left the MLF rate unchanged last week so expectations are for no change but given the rough ride in Chinese markets so far this year, I wouldn’t rule anything out.

The LPR rate was last changed in August: PBOC Loan Prime Rate cut: 1-year 3.45% (prior 3.55%) & 5-year 4.2% (prior 4.20%).

PBOC’s Loan Prime Rate:

• It
  is an interest rate benchmark used in China, set by the People’s Bank
  of China each month. While set on the 20th of the month or the first business day afterwards. The new LPR takes effect on the first day of
  the following month.
• The LPR serves as a
  reference rate for banks when they determine the interest rates for
  (primarily new) loans issued to their customers.
• Its calculated based on the interest rates that a panel of 18 selected commercial banks in China submit daily to the PBOC.
  • The
    panel consists of both domestic and foreign banks, with different
    weights assigned to each bank’s contributions based on their size and
    importance in the Chinese financial system.
  • The LPR is based on the average rates submitted by these panel banks, with the highest and lowest rates excluded to reduce volatility and manipulation. The remaining rates are then ranked, and the median rate becomes the LPR.

The LPR was last left unchanged on December 20.

There is also talk about an RRR cut as the lever to stimulate growth in Q1. At this point, I think it will take some forceful moves to stimulate growth.

After China, the focus on Tuesday will move to the Bank of Japan rate decision. Again, no change is expected but the BOJ could offer signals on its willingness to begin normalizing rates in the springtime.

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