• Prior +2.9%
• Core CPI +3.6% vs +3.6% y/y prelim
• Prior +4.2%

No change to the initial estimates as this reaffirms a continued slowdown in euro area inflation pressures last month.

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

USD

• The Fed left interest rates unchanged as expected with a shift in the statement that
  indicated the end of the tightening cycle.
• The Summary of Economic Projections showed a
  downward revision to Growth and Core PCE in 2024 while the Unemployment Rate
  was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts
  in 2024 compared to just two in the last projection.
• Fed Chair Powell didn’t push back against the strong dovish pricing
  and even said that they are focused on not making the mistake of holding rates
  high for too long, which implies a rate cut coming soon.
• The US CPI last week came in line with expectations
  with the disinflationary progress continuing steady. This was also confirmed by
  the US PPI the day after where the data missed
  estimates.
• The labour market has been showing signs of
  weakening lately but we got some strong releases recently with the US Jobless Claims and the NFP coming
  in strongly.
• The US Retail Sales last week beat expectations across the board as
  consumer spending continues to hold.
• The latest ISM Manufacturing PMI missed expectations falling further into
  contraction, while the ISM Services PMI beat forecasts holding on in expansion.
• The market expects the Fed to start cutting rates
  in Q1 2024.

EUR

• The ECB left interest rates unchanged as
  expected maintaining the usual data dependent language.
• President Lagarde highlighted
  once again that the risks to the economy are skewed to the downside and that
  they did not discuss rate cuts, which was a pushback against the aggressive
  market’s rate cut pricing.
• The recent Eurozone CPI missed
  expectations across the board, further reaffirming that the ECB is done for the
  cycle with rate cuts likely coming soon.
• The labour market remains historically
  tight with the unemployment rate hovering at cycle lows.
• The Eurozone PMIs missed
  expectations across the board with both the Manufacturing and Services sectors
  falling further into contraction.
• The ECB members continue to repeat that they will
  keep rates high for as long as necessary and that the market’s expectations are
  too aggressive.
• The market expects the ECB to start cutting rates in
  Q1 2024.

EURUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that EURUSD bounced
on the 50% Fibonacci retracement level of
the entire rally from the October lows and surged into the 1.10 handle
following the surprisingly dovish FOMC decision and the less dovish than
expected ECB announcement. The resistance formed
by the 1.10 handle and the 61.8% Fibonacci retracement level of the entire fall
since the 1.13 level continues to be a tough nut to crack for the buyers.

EURUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the pair
reversed some of the gains last Friday. The buyers leant on the red 21 moving average where
they had the confluence with the
38.2% Fibonacci retracement level and the 1.09 handle. The price is now
consolidating as the market awaits some catalyst to push it in either direction
but given that we are now basically in the Christmas period, the pair might
just keep on ranging around these levels.

EURUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price has been trading inside an ascending triangle. The
price broke to the upside of the pattern and what follows is generally a
sustained move in the direction of the breakout. The buyers are likely to keep piling
in to target a rally into the 1.10 handle. The sellers, on the other hand, will
want to see the price reversing and breaking below the minor trendline of the triangle
to position for another bearish impulse.

Upcoming Events

This week is a bit empty on the data front as we head
into the Christmas holidays. On Wednesday, we have the US Consumer Confidence
report. On Thursday, we get the latest US Jobless Claims data, while on Friday
we conclude the week with the US PCE report.

This article was written by FL Contributors at www.forexlive.com.

The overall economic assessment still reads as „recovering moderately although some areas stalled recently“ but the government did note that „business sentiment is improving“. Adding that the „business mood and corporate profits are also improving but these have not spilled over to domestic demand“.

In any case, it’s now all about the spring wage negotiations in March and April for Japan. That’s the key focus as we look towards next year.

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

• The next phase is not when to reduce rates, even though that’s where the markets are at
• It is about how long do we need monetary policy to remain restrictive in order to get inflation back to 2% target
• Markets are a little bit ahead
• They have jumped to the end part i.e. „we are going to normalise quickly“, and I don’t see that
• Fed’s policy settings are now in a good place
• But you don’t want to inadvertently become more restrictive than what you think is appropriate

The full interview from the FT can be found here (may be gated). This echoes the comments from Williams on Friday. But it highlights a failure in communication by the Fed somewhat, in having to walk back Powell’s press conference last week.

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

Last week, the Dow Jones surged to new highs
following the surprisingly dovish FOMC decision where
the Fed increased the rate cuts expected in 2024 to three and Fed Chair Powell
delivered some dovish comments. In the last part of the week, we got a slate of
soft-landing data as the US Jobless Claims and Retail Sales beat
expectations, while the US PMIs missed on the manufacturing side and beat on
the services one.

Dow Jones Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Dow Jones last
week surged to a new all-time high following the dovish FOMC decision. The
rally since the end of October has been pretty insane with very shallow
pullbacks which points to either a short squeeze or lots of FOMO. Waiting for
pullbacks didn’t provide any opportunity, but chasing such rallies is generally
a bad idea as they can reverse most of the gains once a negative catalyst hits
the market.

Dow Jones Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that from
a risk management perspective, the buyers would be better off leaning on the trendline where
they will find the confluence with
the previous all-time high level and the red 21 moving average. The
sellers, on the other hand, will want to see the price breaking below the
trendline to position for a drop into the 35683 level.

Dow Jones Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action and we can notice that the buyers will also
find the confluence with the 38.2% Fibonacci
retracement level around the trendline. This makes it
a strong support zone where the buyers will lean onto to position for another
rally while the sellers will want to see the price breaking lower to invalidate
the bullish setup and target new lows.

Upcoming Events

This week is a bit empty on the data front as we head
into the Christmas holidays. On Wednesday, we have the US Consumer Confidence
report. On Thursday, we get the latest US Jobless Claims data, while on Friday
we conclude the week with the US PCE report.

This article was written by FL Contributors at www.forexlive.com.

• In the real world, there’s inevitably a degree of inaccuracy in economic
  measurement
• Currently, there’s a little more uncertainty
  than usual about the behaviour of unemployment
• Official estimates of wage growth have
  been volatile
• Other indicators have exhibited slightly lower rates
  of growth through much of this year
• It takes time to understand the forces driving
  the economy, particularly services inflation and wage growth
• It will probably require a
  more protracted and clearer decline in wage growth data before we can safely conclude
  that things are on a firmly downward trend
• Full speech

That’s a really long and roundabout way of saying that „we still don’t see enough data to justify a policy pivot yet“.

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

It’s been a quiet start to the week and not too surprising as markets are looking to wind down for the year already. The dollar benefited from NY Fed president Williams‘ comments late on Friday, but is seen trading more mixed and mostly little changed today. USD/JPY is up 0.3% to 142.50 levels now, running back up against its 200-day moving average (blue line) at 142.55:

That comes despite Treasury yields sitting lower today with 10-year yields down 3 bps to just under 3.90% currently.

Going back to USD/JPY, keep below the 200-day moving average and sellers will continue to retain a more bearish bias in the pair for the time being.

Elsewhere, EUR/USD is up 0.2% to 1.0913 with large option expiries at 1.0910 in play. GBP/USD is down marginally at 1.2670 while AUD/USD is up 0.4% to 0.6725 as the antipodean currencies are keeping a more positive start to proceedings this week. NZD/USD is also up 0.5% to 0.6235 even with a lack of headlines to work with.

Both the aussie and kiwi are building on technical breaks from last week, with equities also consolidating at the highs for the year for now.

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

Macy’s shares surged approximately 20% following the
announcement of a $5.8 billion takeover bid. This suggests Macy’s might become
a private company, with its shares being acquired at a 32% premium to the $16
price. However, some analysts advise against hasty decisions and recommend
adopting a wait-and-see position. Let’s delve into the developments surrounding
this major chain of department stores.

Star takes center stage on the Macy’s logo, and perhaps
that’s the reason why its stock shone like December stars, experiencing a 20%
surge after reports of an investor consortium intending to acquire Macy’s
business, including a buyout of shares at a $21 price per share.

In fact, the share price grew to $21 but later adjusted to
$19. The reasons behind this adjustment will be discussed shortly.

Notably, a buyout price of $21 falls short of Macy’s
stock’s all-time high. Considering this year’s results, it becomes evident that
the asset is in red. Anyway, for consistently growing stocks, one might want to
explore
the Apple stock chart. There are few things in the world as stable as that.

As you already know, Macy’s stock grew due to the takeover
bid news. But why did a noticeable adjustment occur afterward? Some analyst
teams, with
Citi leading the way, are skeptical about the possible bid. They believe that
Macy’s business structural troubles, the current interest
rates situation, and the decline of Macy’s property value might pose
obstacles to financing the deal.

Plus, the prospects of department store businesses are
ambiguous. We are living in the era of online shopping, rapid deliveries, and
one-click orders. These factors led Citi to downgrade the analyst rating of
Macy’s stocks to Sell.

However, it’s possible that some specialists underestimate
the probability of the bid as well as the adaptability of department stores.
Macy’s and other companies in this sector do not stand still – they are
enhancing their online capabilities.

Predicting Macy’s future is challenging. If you’re seeking
trading opportunities here, closely monitoring the news and conducting your own
research is crucial.

This article was written by ForexLive at www.forexlive.com.

• MON: German Ifo (Dec), New Zealand Trade Balance (Nov).
• TUE: BoJ & NBH Policy Announcements, RBA Minutes (Dec); EZ HICP Final
  (Nov), Canadian CPI (Nov), Japanese Trade Balance (Nov).
• WED: PBoC LPR, BoC Minutes (Dec); UK CPI (Nov), EZ Current Account
  (Oct), EZ Consumer Confidence Flash (Dec), US Existing Home Sales (Nov).
• THU: CBRT & CNB Policy Announcements; UK PSNB (Nov), US Final GDP
  (Q3), IJC (w/e 15th), Philadelphia Fed (Dec), Canadian Retail Sales (Oct),
  Japanese CPI (Nov).
• FRI: BoJ Minutes (Oct), UK GDP (Q3), UK Retail Sales (Nov), Swedish PPI
  (Nov), US PCE Price Index (Nov), Durable Goods (Nov), Uni. of Michigan Final
  (Dec), New Home Sales (Nov).

NOTE: Previews are listed in day order

BoJ Announcement (Tue):

The BoJ is expected to maintain its policy settings at the December
meeting, according to all respondents polled by Reuters between December 8th to
14th. BoJ expectations have been choppy over the past couple of weeks following
commentary from Governor Ueda who, among other points, said “handling of
monetary policy would get tougher from the end of the year”. These comments
fuelled speculation of a potential December move by the BoJ, with the Yen
rallying on the expectations. Thereafter, a Reuters source piece said there was
no intention by Governor Ueda to signal “anything about the timing of a policy
change”. More recent sources clarified that the BoJ is said to see little need
to end negative rates in December and intends to come to a decision based on data
up to the last minute, and officials view the potential cost of waiting for
more data as not very high. Sources added that the BoJ lacks proof of
sustainable inflation and has not yet seen sufficient evidence of wage growth
which would support sustainable inflation. The latest Tokyo CPI, which is seen
as a precursor to the nationwide metric released on Thursday (after the BoJ
meeting), saw the Core Y/Y miss expectations (2.3% vs exp. 2.4%, prev. 2.7%).
Furthermore, following the December FOMC decision (which saw a dovish pivot), a
Nikkei article citing a BoJ insider suggested Japan’s negative rate exit
scenario has been muddled by the Fed’s outlook -”if possible, I’d look forward
to wage increases that surpass this year’s”. The article added that from the
standpoint of consistency, the BoJ would hold off until confirming the results
of the spring labour talks, including those at small businesses, and that
perspective makes an exit in the latter half of 2024 a convincing scenario as
well. “The end of the negative interest rate policy would be the beginning of a
tightening cycle,” the BoJ insider said. The latest Reuters poll shows that 21%
of economists think the BoJ will begin to unwind ultra-loose policy in January
2024, while 84% expect the BoJ will end NIRP in 2024 vs 71% in the November
poll and 54% in the October poll. 88% of economists expect the BoJ to end YCC
policy and 12% think the BoJ will tweak again. 28 out of 42 economists expect
the BoJ to raise the deposit rate to 0% or 0.10% by end-Q2 2024, while two
expect rates at 0.25%.

Japan Trade Balance (Tue):

The November trade deficit is expected to widen to JPY 962.4bln from the
prior deficit of JPY 662.5bln, whilst exports are seen cooling to 1.5% (prev.
1.6%) but the contraction in imports seen improving to -8.6% (prev. -12.5%).
Auto-related exports are anticipated to remain strong due to easing supply
constraints. However, machinery-related shipments are likely to see a
contraction, mainly due to the downturn in the Chinese economy, according to
desks.

RBA Minutes (Tue):

The RBA will release the minutes from the December 5th meeting next week
where the central bank kept the Cash Rate Target unchanged at 4.35%, as
expected, and reiterated its forward guidance on whether further tightening is
required to ensure inflation returns to the target in a reasonable timeframe
will depend upon data and evolving assessment of risks. RBA also repeated that
the Board remains resolute in its determination to return inflation to target
and will do what is necessary to achieve that outcome, as well as noted there
are still significant uncertainties around the outlook and that the limited
information received on the domestic economy since the November meeting has
been broadly in line with expectations. The language from the central bank was
largely reiterations of the commentary from the prior meeting and therefore
less hawkish than many were anticipating considering the rhetoric from RBA
Governor Bullock in the weeks leading up to the meeting who was more forceful
in her warnings that inflation remained a crucial challenge and had stated that
more substantial monetary policy tightening is the right response. Nonetheless,
participants will be eyeing the minutes on the off chance that there are more
meaningful clues on monetary policy.

Canada CPI (Tue):

The BoC’s recent policy statement said that central bank officials were
still concerned about the risks to inflation, although the updated statement
dropped a reference to inflationary risks increasing. The BoC wants to see
further and sustained easing of core inflation, and is continuing to monitor
inflation expectations too. It noted that its own preferred gauges of core
inflation have been ranging 3.5-4% recently, with the October metrics towards
the bottom of that range. BoC Deputy Governor Gravelle said the bank was
encouraged by the progress made in October, but wants to see the improvement
progress further, and the BoC was not there yet on its price goal, adding that
it was pretty clear that Canada was still not on the path to sustainable 2%
inflation.

PBoC LPR (Wed):

The PBoC is expected to maintain the Loan Prime Rates next week with the
1-Year LPR currently at 3.45% and 5-Year LPR at 4.20%. As a reminder,
rate-setters have refrained from making any adjustments to the benchmark
lending rates since the last cut to the 1-Year LPR in August which most new
loans are based on, while the 5-Year LPR which serves as a reference rate for
mortgages was last reduced in June. The expectations for the PBoC to maintain
the Loan Prime Rates follow the recent decision to keep the 1-Year MLF rate
unchanged at 2.50% as this provides a fairly reliable indicator for the central
bank’s intentions for the benchmark LPRs and although there has been
speculation in Chinese press regarding scope for a RRR cut to meet liquidity
needs at year-end, this has so far failed to materialise. Furthermore, recent
comments from PBoC Governor Pan haven’t suggested any urgency for a near-term
adjustment in which he noted that China’s economy continued to gain momentum in
recovery with the economy expected to achieve the GDP growth target for 2023
and they will continue to keep monetary policy accommodative, while the PBoC’s
Q3 Monetary Policy Report stated that they will further promote financial
institutions to lower the effective lending rate and that prudent monetary
policy will be forceful and precise.

BoC Minutes (Wed):

At its policy meeting, the BoC left rates unchanged at 5.00%, as
expected, but tweaked its statement with both hawkish and dovish tones. On the
dovish side, it noted signs that rate hikes were having an impact, stating that
“higher interest rates are clearly restraining spending: consumption growth in
the last two quarters was close to zero, and business investment has been
volatile but essentially flat over the past year.” It also referenced the Q3
GDP contraction, easing labour market, and that the economy was no longer in
excess demand. The statement dropped a line that said progress toward price
stability was slow, and inflationary risks have increased. On the hawkish side,
however, it reiterated concerns about the risks to the outlook for inflation, and
maintained guidance that it is prepared to raise the policy rate further if
needed. Still, with price pressures abating and economic growth slowing,
markets remain of the view that the central bank is done with rate hikes,
particularly since BoC Governor Macklem’s recent remarks that policy may now be
restrictive enough. Attention now is turning towards the start of its easing
cycle. Money markets are pricing a little over 100bps of easing in 2024, with
the first cut fully priced by April. Macklem has said that it was not the time
to be talking about rate cuts, and the BoC would likely be cautious over any
rising inflation expectations if the consumer starts to expect rate cuts.

UK CPI (Wed):

Expectations are for headline CPI in November to cool to 4.4% Y/Y from
4.6%, with the core measure seen slipping to 5.5% Y/Y from 5.7%, The October
report saw the headline decline to 4.6% from 6.7%, while core inflation fell to
5.7% Y/Y from 6.1%, while the all services measure slipped to 6.6% Y/Y from
6.9% (vs. MPC forecast of 6.9%). Analysts noted that the decline in the
headline rate was not too surprising following last year’s 25% increase in
household energy bills, which fell out of the annual comparison. For the
upcoming release, analysts at Investec expect that food and energy price
inflation will likely contribute to declines once again with scope for goods
prices to keep easing. The desk cautions that declines will not be uniform as
“base effects in clothing and footwear prices, for instance, look unfavourable,
as there was already a large drop last year”. From a policy perspective, given
that the MPC opted to hold rates at its December meeting and maintained
guidance that policy will need to be restrictive for an “extended” period of
time, the upcoming release will likely have little sway on the immediate rate
path. That said, there may be some modest fluctuations around current pricing
which sees an 88% chance of a May cut with 112bps of policy loosening priced by
year-end.

CBRT Announcement (Thu):

The CBRT is expected to raise its One-Week Repo Rate by 250bps according
to all 12 economists polled by Reuters. CPI data for November printed sub
forecasts but CPI Y/Y and PPI Y/Y both reaccelerated a touch, with the CPI Y/Y
at 61.98% (exp. 63.00%, prev. 61.36%), M/M at 3.28% (exp. 3.90%, prev. 3.43%),
and PPI Y/Y at 42.25% (prev. 39.39%). To recap the prior meeting, the CBRT
hiked its Weekly Repo Rate by 500bps (vs median exp. 250bps hike) to 40% (prev.
35%, exp. 37.5%); expectations ranged from 250-500bps. The central bank stated
that the pace of monetary tightening will slow down and the tightening cycle
will be completed in a short period of time. The statement clarified that
monetary tightness will be maintained as long as needed to ensure sustained price
stability. The latest CBRT survey meanwhile suggested the Repo Rate is seen at
36.65% (prev. survey 37.01%), USD/TRY seen at 29.6229 (prev. 29.9961), and
12-month CPI seen at 41.23% (prev. 43.94%).

Japan CPI (Thu):

The National Core Y/Y is expected to cool to 2.5% in November (vs 2.9%
in October). These expectations come as the November Core Tokyo CPI (seen as a
preview of the nationwide release) saw a cooling of a similar magnitude from
October (2.3% vs exp. 2.4%, prev. 2.7%). According to a Reuters poll of 17
economists, the expected fall in the core metric is partly due to energy.
“Consumer inflation will drop substantially thanks to the government’s energy
subsidy programs, and inflation is likely to decelerate to 2.7% YoY in November
from 3.3% in October”, say the analysts at ING. Looking at the corporate price
expectations survey within the latest BoJ Tankan release, Japanese firms expect
consumer prices to rise 2.4% a year from now (vs +2.5% in the previous survey,
2.2% 3 years from now (vs prev. +2.2%), and 2.1% 5 years from now (vs prev.
+2.1%). It’s also worth being aware that the release comes after the BoJ policy
announcement and as markets prepare to close out for Christmas.

UK Retail Sales (Fri):

The BRC gauge of retail sales rose 2.6% Y/Y in November, with the
accompanying release stating that “Black Friday began earlier this year as many
retailers tried to give sales a much-needed boost in November. While this had
the desired effect initially, the momentum failed to hold throughout the month,
as many households held back on Christmas spending”. Elsewhere, the Barclaycard
consumer spending report noted “overall Retail spending grew 2.5% in November
2023, an uplift compared to the year-on-year growth in October 2023 (of 1.2%),
as Clothing retailers and Department Stores received a boost due to Black
Friday sales starting earlier on in the month, combined with the late arrival
of seasonally cold weather”. Ahead of the upcoming release, Moody’s says that
“given losses to purchasing power and low sentiment we think households spent
less in the lead up to the holiday season. That said, Black Friday sales may
have been particularly attractive this year given households’ broad pessimism”.

US PCE (Fri):

Analysts expect to see PCE inflation cooling further in November after
similar outcomes seen within the CPI and PPI inflation reports. WSJ’s
Fedwatcher Nick Timiraos says core PCE inflation is projected to have been a
very mild 0.06% in Nov, and that could see the annual reading of core PCE fall
to 3.1% in November from 3.5% in October. And it would also imply that the
six-month annualised rate would have eased to 1.9%, below the Fed’s 2% price
goal.

This article was written by Newsquawk Analysis at www.forexlive.com.

Make it a 7 and 7.

That is 7 consecutive up days, and 7 consecutive up weeks for the the Dow and the Nasdaq. The late day rally fizzled into the close for the S&P, however, as it closed marginally lower on the day (but still down).

There is two more weeks to the end of the year which has seen the Dow move to a new all-time record this week (above 36952.65).

Although unchanged today, the S&P is now just 2.1% from a new all time close (above 4818.62).

Both the S&P and the Nasdaq are trading at the highest levels since January 2022.

The final numbers are showing:

• Dow Industrial Average rose 56.79 points or 0.16% at 37305.15
• S&P index – 0.36 points or -0.01% at 4719.18
• Nasdaq index was 52.35 points or 0.35% at 14813.11

The Russell 2000 which started yesterday fell -15.3 points today or -0.77% to 1985.12

Looking at the trading week, although the S&P index was lower today, it still rose for the week making it seven weeks in room:

• Dow Industrial Average rose 2.92%. Since his recent bottom in the week of October 23, the index is up 15.4%
• S&P index rose 2.49%. It’s gain since October low is 15.0%
• Nasdaq index rose 2.85%. It’s gain since October low is 18.10%
• Russell 2000 index rose by 5.546% for its largest gain since October 30 week, and the second largest weekly gain in 2023. Again since the October low is 21.5%.

And, finally for the trading year:

• Dow Industrial Average is up 12.54%
• S&P index is up 22.91%
• Nasdaq index is up 41.54%
• Russell 2000 is up 12.71%

I will have a 7 and 7 and day of the week. Cheers and have a great weekend.

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