This isn’t anything new as the presumption now is that they will have the election in October. But either way, it will definitely be in the second half of the year surely at this stage. Politics is going to be stealing the spotlight towards the end of the year with the US also set to head to the polls in November.
This article was written by Justin Low at www.forexlive.com.
Last Thursday, the
USD weakened across the board following the weak US
jobless claims figures where initial claims spiked to the highest level
since August 2023. Now, jobless claims are notoriously volatile, so that could
have been just a blip, but the weak consumer
sentiment report on Friday could be another supporting signal for economic weakness
ahead, although the data might have been skewed more by inflation worries.
Overall, in the short-term it wasn’t a real gamechanger and the next trend will
likely be set by the US CPI report due on Wednesday where hot data should send
the pair lower while soft figures could trigger a rally into the 1.10 handle.
EURUSD
Technical Analysis – Daily Timeframe
On the daily
chart, we can see that EURUSD is trading right around the key trendline
near the 1.08 handle. This is where we can expect the sellers to step in with a
defined risk above the 1.08 level to position for a drop into the 1.05 handle.
The buyers, on the other hand, will want to see the price breaking to the
upside to start targeting the 1.09 handle and eventually the 1.10 level.
EURUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart,
we can see that we have kind of a range between the 1.0760 support
and the 1.0800 resistance. Given the lack of key economic releases today, we
can expect a rangebound price action until the key US data in the next couple
of days. A break above the 1.08 resistance supported by the data, should lead
to a sustained rally into new highs. Conversely, a break below the 1.0727 level
will likely take us to new lows with the 1.05 handle as the next target.
Upcoming
Catalysts
This week all eyes will be on the US CPI report due on
Wednesday, but we will have other notable releases throughout the week. We
begin tomorrow with the US PPI and Fed Chair Powell speech. On Wednesday, we
get the US CPI report and the US Retail Sales data. On Thursday, the focus will
be on the latest US Jobless Claims figures to see whether the last week’s numbers
were the start of a trend or just a fluke.
See the video below
This article was written by Giuseppe Dellamotta at www.forexlive.com.
Tuesday
The UK Unemployment Rate is expected to
tick higher to 4.3% vs. 4.2% prior with Average Hourly Earnings (including
bonus) seen at 5.3% vs. 5.6% prior. Barring big surprises, this report is
unlikely to change much for the BoE as the central bank is more
focused on the two inflation reports ahead of the June meeting where it
could deliver the first rate cut. The market sees a 50/50 chance of a rate cut
in June at the moment.
The US PPI M/M is expected at 0.2% vs.
0.2% prior, while the Core PPI M/M is seen at 0.2% vs. 0.2% prior. There’s a
risk of an upside surprise considering that both the prices paid components
in the ISM
PMIs jumped to cycle highs. The market will likely focus more on the US CPI
report coming out the following day, although a hot PPI might trigger some
defensive positioning into the CPI data.
Wednesday
The Australian Wage Price Index Q/Q is
expected at 1.0% vs. 0.9% prior. The Australian labour
market remains pretty tight with high wage growth and persistently high
inflation. Nonetheless, the RBA at the latest
policy decision refrained from turning overly hawkish as the central bank
continues to wait for more information. The market now sees the first rate cut
sometime in Q2 2025 with even some chances of a rate hike this year. High wage
growth without a looser labour market will likely make it hard for the RBA to
reach their target “within a reasonable timeframe”.
The US CPI Y/Y is expected at 3.4% vs. 3.5%
prior, while the M/M measure is seen at 0.3% vs. 0.4% prior. The Core CPI M/M
is expected at 0.3% vs. 0.4% prior. Given the market’s pricing and general fear
of persistently high inflation, a downside surprise will likely trigger a much
bigger reaction than an upside surprise. Fed
Chair Powell pushed back against rate hikes expectations as he stated that they
would need “persuasive” evidence that their policy isn’t restrictive
enough.
So, if inflation remains high but doesn’t
re-accelerate notably, they will just keep rates higher for longer. The market expects
almost two rate cuts (45 bps) by the end of the year which can easily go back
to one or even zero in case we get another hot inflation report. A soft report
might add one extra cut to the pricing but not much more as the Fed will want
to cut rates at a meeting containing the SEP (barring a quick deterioration in the labour market), which falls in September at the earliest.
The US Retail Sales M/M is expected at
0.4% vs. 0.7% prior, while the ex-Autos M/M figure is seen at 0.2% vs. 1.1%
prior. We got some soft consumer sentiment reports recently which might filter through
lower consumer spending. The retail sales data is notoriously volatile and
given that it will be released at the same time of the CPI report, the market
will likely ignore the release.
The PBoC is expected to keep the MLF rate
unchanged at 2.50%. The data out of China has been mostly positive with
the latest inflation
rates slowly crawling out of deflation. Therefore, the central bank is
likely to keep the policy rates steady for the time being given the lack of
urgency.
Thursday
The Australian Labour Market report is
expected to show 25.3K jobs added in April vs. -6.6k in March with the Unemployment
Rate ticking higher to 3.9% vs. 3.8% prior. The RBA is more focused on
inflation but if the tightness in the labour market continues, especially
with high wage growth, it will make it harder for the central bank to reach its
target “within a reasonable timeframe”.
The US Jobless Claims continue to be one
of the most important releases to follow every week as it’s a timelier
indicator on the state of the labour market. This is because disinflation to
the Fed’s target is more likely with a weakening labour market. A resilient
labour market though could make the achievement of the target more difficult.
Initial
Claims saw the first notable miss last week coming in at 231K vs. 215K
prior, which was the highest since August 2023. Of course, one miss doesn’t make
a trend, but it’s worth to keep an eye on this given the recent miss in the NFP
report and softer consumer sentiment data. This week Initial Claims are
expected at 220K vs. 231K prior, while there is no consensus at the time of
writing for Continuing Claims although the prior release showed an increase to
1785K vs. 1785K expected and 1768K prior.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
The current projection is for the US population to now peak at just-under 370 million in 2080 but with it reaching 359m in 2040, it’s a really long plateau.
Given the plunge in fertility rates and the hardening of attitudes against immigration and the trend, I’d certainly say that risks are to the downside.
There has been plenty of talk in the market about China’s population peaking but China still has a great deal of rural-to-urban immigration to supplement the productive workforce.
In any case, the US is far more important for the global economy and these changes in population materially affect the long-term prospects of virtually every consumer-facing business, along with real estate values.
It’s an even bigger problem in Europe and many other parts of the world. Changing attitudes about fertility and the number of children people want to have are a real problem for markets.
This article was written by Adam Button at www.forexlive.com.
Iraq’s oil minister made a comment suggesting they won’t agree to any additional cuts at the June 1 OPEC+ meeting.
What’s not clear is if he meant:
I would hope we get some clarification before the market open but it doesn’t look good. He was asked by a reporter whether Iraq would agree to extend the current voluntary cuts and he replied:
„Iraq has reduced (output) enough and will not agree to any new cut“
Take that for what it’s worth.
In addition, Iraq has overproduced its quota by a cumulative 602k bpd in Q1 and OPEC said it agreed to compensate over the remainder of the year, but this statement certainly calls that assumption into question.
I’d expect to see some pressure on oil at the open.
This article was written by Adam Button at www.forexlive.com.
Retail sales, excluding motor vehicles, experienced significant growth during the month, largely driven by an uptick in home-related purchases, sporting goods, and clothing. These trends indicate a broader seasonal trend as Canadians prepare for summer, according to the April spending tracker from RBC. The metric is based on the credit card data of Canada’s largest bank.
They noted that spending on the category of home furnishings, renovation materials, and garden supplies saw its first notable increase in a year, while building materials accounted for nearly a third of April’s overall spending increase. Other strength was in hotels and restaurants.
The lone categories that saw decreases were groceries, gasoline, and miscellaneous goods.
Overall, RBC doesn’t think the strength in spending will last:
April RBC consumer spending data marked a stronger start to Q2 than we expected. But one month does not make a trend. We are cautiously optimistic that consumer activity will improve this year- as adjustment to higher rates hits households less hard in 2024. The question is- will consumer optimism prevail into summer? Labour market headwinds have been building with the unemployment rate up one full percentage point from a year ago and layoffs rising in recent months. A ramp up of business insolvencies in Q1 alongside higher household credit delinquency rates add to these headwinds. We continue to expect consumer spending to pick up in the back half of the year once BoC cuts are underway, likely starting in June
This article was written by Adam Button at www.forexlive.com.
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Today’s ETHUSD technical analysis and price forecast – May 11, 2024
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CPI +0.3%
PPI -2.5%
The slight lift for the CPI is good news in China and should be a positive for China markets, and China proxy trades, such as AUD, at the margin.
Stay tuned, its an active week coming from China with the People’s Bank of China’s medium-term lending facility (MLF) rate decision due on Wednesday. No change to the rate is expected. If we do see cuts from the PBOC, the first is likely to be to the reserve requirement ratio (RRR). Actual cuts to lending rates would widen the interest rate differential with the rest of the world (cough … USA) and would further pressure the yuan. In the months to come the PBOC may have no choice but to cut rates if the economy continues to only stumble along though. There are ‚green shoots‘ showing (last week’s trade data was a welcome improvement), but they are sporadic and the debt-ridden property sector remains a huge drag.
This screenshot, from our Economic Calendar, is of y/y CPI. The CPI scale is on the righ- hand side and its a wee bit confusing, but I’ve put a box around the zero point to make it a little easier to see:
This article was written by Eamonn Sheridan at www.forexlive.com.
The US session was informed most by the University of Michigan consumer sentiment preliminary data which showed a sharp decline in the sentiment index to 67.4 from 76.0 . The expectations also fell sharply to 66.5 from 75.0 and current conditions also tumbled to 68.8 versus 79.0. To make the data even worse when you inflation expectations rose to 3.5% from 3.2% last month which was the highest level since November 2023. The five year inflation also rose to 3.1% from 3.0% last month.
Although somewhat shocking, there were reports that this month marked the first month that the survey was done electronically versus through phone calls (people pick up phones and answer questions on the economy….hmmmm). The commentary was that statistically people are more pessimistic about inflation when surveyed online. I wonder if generally there also pessimistic about the economy in general.
Nevertheless, the news sent yields higher, and erased gains in the NASDAQ index in particular which was up +91.13 points at session highs before rotating to the downside to as much as -52.74 points lower on the day ast session lows. The index ended up closing near unchanged. The S&P was up 0.17% in the Dow Industrial Average average rose for the 8th consecutive day with a gain of 0.32%.
For the trading week, the Dow closed higher for the 4th consecutive week. Both the Nasdaq and the S&P closed up for the 3rd straight week:
In the US debt market, the yield closed higher across the curve with the shorter end up the most:
For the trading week, the yields were mixed with the shorter end rising and the longer end falling:
There was more Fedspeak today with Fed’s Kashkari, Chicago Fed Pres. Goolsbee and Dallas Fed Pres. Lorie Logan all speaking.
Neel Kashkari from the Federal Reserve discussed economic issues and monetary policy, highlighting persistent U.S. housing supply challenges and the impact of higher interest rates on reducing this supply in the short term. Kashkari emphasized the necessity of controlling inflation and noted that low interest rates alone wouldn’t resolve housing issues. He expressed caution about the restrictiveness of current monetary policies, pointing out that the business community doesn’t view financial conditions as tight. Currently in a „wait and see“ mode, Kashkari is open to the possibility of future rate hikes but notes that any decision to increase rates would require significant justification. He remains uncertain about the neutral rate’s current level, suggesting a period of steady rates ahead unless conditions change markedly.Meanwhile, Chicago Fed Pres. Goolsbee was also talking a lot today discussed the managing inflation, particularly emphasizing the 2% target as an anchor for expectations. He acknowledged the current high short-term inflation expectations but cautioned against overreacting to these. Goolsbee highlighted that although inflation has not shown signs of settling at 3%, the real Fed funds rate is the highest it has been in decades, suggesting a restrictive monetary policy stance. He mentioned the complexity of interpreting recent data due to positive supply developments, including a significant boost from increased immigration which adds approximately 80,000 jobs monthly. Housing inflation remains a critical concern, with rates contributing to supply issues but not fully explaining the persistent high inflation in housing. Despite various economic indicators and the challenges of housing inflation, Goolsbee remains cautiously optimistic about reaching the 2% inflation target, provided housing inflation decreases. He also noted the ongoing recovery of supply chains and potential lasting benefits from labor supply increases into 2024, maintaining a stance that nothing is off the table in terms of policy adjustments to control inflation.
Finally, Dallas Fed Pres. Lorie Logan was probably the most hawkish of the three. Logan highlighted that the Federal Reserve has made substantial progress on combating inflation, noting that the economy and labor market are currently strong. However, she expressed concerns, stating that the fight against inflation is not over as the first quarter inflation data was disappointing. Logan pointed out the presence of significant upside risks to inflation and uncertainties around whether the current policy is sufficiently restrictive. She emphasized that it is too early to consider lowering interest rates and stressed the importance of maintaining flexibility in monetary policy. Additionally, Logan suggested that the neutral interest rate level, which balances the economy without stimulating or restraining growth, may have risen, indicating a possible shift in the economic environment that could affect future policy decisions.
In the forex market, the major indices are ending the day fairly scrunched together in up and down trading. The CAD was the strongest of the major currencies, while the NZD was the weakest.
For the trading week, the greenback is ending mixed and little changed vs the major currencies. Below are the % changes of the greenback vs the major currencies:
Thank you for your support this week and wish you all a wonderful weekend.
This article was written by Greg Michalowski at www.forexlive.com.
The final numbers are showing:
The small-cap Russell 2000 fell -13.85 points or -0.67% at 2059.77
For the trading week:
This article was written by Greg Michalowski at www.forexlive.com.