„Purchases of physical merchandise (excluding motor vehicles) ticked lower in December,“ RBC said in its month spending tracker, which is based on its cardholder data.

Spending on gifts was up just over 4% this year in Nov/Dec in nominal terms, just ahead of the 3% y/y inflation rate. However for December alone, both discretionary goods and services spending ended on a softer note.

Canadians continue to feel the squeeze of higher interest rates, but softer broader economic growth data (per-person GDP is on track to decline for a 6th consecutive quarter in Q4 2023) is bringing the Bank of Canada closer to a potential pivot to interest rate cuts, likely in the middle of the year in our own forecast.

Read the full report

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

Globally, eyes on Monday will be on stock markets in Taiwan (and China) following Saturday’s election.

Data elsewhere includes German GDP and the Bank of Canada business outlook survey.

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

A miss on both earnings and revenue isn’t a good sign (the same goes for BofA earnings as well today) and that is arguably what is weighing further on stocks right now. In any case, Jamie Dimon’s remark as per the headline above also serves as a warning and that is taking some of the enthusiasm out of markets after the reaction to the CPI data yesterday.

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

US futures are now down near the lows for the day, with S&P 500 futures falling by 0.4% ahead of US trading. This comes as Treasury yields are keeping steadier, with 10-year yields up 1.7 bps to 3.989% on the day. The drop comes as the big banks are releasing earnings, adding to the post-CPI push and pull play out across markets.

All of this is keeping the dollar a touch firmer as well now with EUR/USD down 0.2% to 1.0948 and GBP/USD down 0.2% as well to 1.2730 on the day. USD/JPY did push lower to 144.90 earlier in the session but is now back to flat levels around 145.23 currently.

The dollar’s advance is not a uniform one though, as gold is up to session highs at around $2,045 – up 0.8% on the day – and looking to push past key near-term resistance as highlighted here. Meanwhile, tensions in the Middle East continue to fuel the rally in oil with WTI crude up over 4% to near $75 at the moment.

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

This is yet again another heads up to the upcoming UK labour market report that will be released next week. This has been an ongoing thing since October already as seen here. As noted at the time, ONS says that the data will feature „a new series using additional data sources to produce adjusted levels and rates for employment, unemployment and inactivity“.

To add to the headline above, ONS says that a fuller release of the UK labour market statistics should come in February.

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

• The Fed left interest rates unchanged as
  expected at the last meeting 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.
• The latest US CPI
  slightly beat expectations but analysts expect the Core PCE to print at 0.2%
  M/M again following the CPI data.
• The labour market continues to soften although Initial Claims keep on
  hovering around cycle lows while Continuing Claims got stuck at a higher level.
• The latest ISM Manufacturing
  PMI
  beat expectations, while the ISM Services PMI missed
  by a big margin.
• The hawkish Fed members have been leaning
  on a more neutral side lately.
• The market expects the Fed to start cutting rates
  in Q1 2024.

AUD

• The
  RBA left interest rates unchanged as expected at the last meeting with
  the central bank maintaining the usual data dependent language.
• The
  recent Monthly CPI report missed expectations across
  the board which is another welcome development for the RBA.
• The
  latest labour market report beat forecasts across the
  board although the unemployment rate rose more than expected.
• The
  wage price index surprised to the upside as wage
  growth in Australia remains strong.
• The
  Australian PMIs improved recently but remain in
  contraction.
• The
  market expects the RBA to start cutting rates in Q3 2024.

AUDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that AUDUSD continues
to consolidate at a key support zone
around the 0.6670 level where we can also find the 61.8% Fibonacci retracement level
for confluence. The
buyers are likely to keep piling in here with a defined risk below the support
to position for a rally into the 0.69 handle. The sellers, on the other hand,
will want to see the price breaking lower to increase the bearish bets into the
0.65 handle.

AUDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the recent
price action has been rangebound as the market remains uncertain where to go
next given the mixed economic data. If the price breaks above the minor trendline we can
expect the buyers to increase the bullish bets into the 0.69 handle while a
break below the support will likely trigger a selloff into the 0.65 level.

AUDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the recent price action with no clear level where to lean onto except
the support zone and the minor trendline. The best strategy is generally to sit
out and wait for a breakout supported by a fundamental catalyst, although one
can also “play the range” by buying at support and selling at resistance.

Upcoming Events

Today the only notable event on the agenda is the US
PPI data.

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

This is related to the quarterly economic outlook report due this month, with the news yesterday here: BOJ reportedly considers lowering price outlook for fiscal year 2024 to middle 2% range

The sources cited in this report say that the BOJ is likely to cut its core inflation forecast for the fiscal year 2024 (currently 2.8%) amid the recent decline in oil prices. That fits with the linked story from above yesterday. However, policymakers are not likely to make any major changes to their „core core“ inflation forecast – expected to stick around 1.9% for both fiscal year 2024 and 2025.

One of the sources said that „the broad uptrend in inflation and wages remains intact“, with another stating that „consumption is holding up and there’s growing conviction that wage hikes will continue, and even broaden, this year“.

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

In the latest outlook report for October last year, the BOJ noted the projection for prices for the fiscal year 2024 to be at around 2.7% to 3.1%. So, to have it be brought lower back to around the 2.5% mark is not exactly a good show of confidence that they are seeing inflation to be more sticky in the year ahead.

This all brings us back to this question here: Can the BOJ beat the inflation clock?

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

• The Fed left interest rates unchanged as expected at the last meeting 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.
• The latest US PCE missed expectations across the board with
  the Core 6-month annualised rate falling below the Fed’s target at 1.9%.
• The NFP report beat
  expectations although there was more weakness under the hood.
• The latest ISM Manufacturing PMI beat expectations, while the ISM Services PMI missed by a big margin.
• The hawkish Fed members have been leaning
  on a more neutral side lately.
• The market expects the Fed to start cutting rates
  in Q1 2024.

EUR

• The ECB left interest rates unchanged as
  expected at the last meeting 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 with the disinflationary process remaining intact.
• 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 are
  done with the tightening cycle and they are now debating when to start cutting
  rates.
• The market expects the ECB to start cutting rates in
  Q2 2024.

EURUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that EURUSD recently
bounced on the key trendline around
the 1.09 handle where we had also the 61.8% Fibonacci retracement level
for confluence. This is
where the buyers stepped in with a defined risk below the trendline to position
for a rally into new highs. The sellers, on the other hand, will need the price
to break below the trendline to invalidate the bullish setup and position for a
drop into the 1.07 handle.

EURUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the pair got
stuck in a consolidation between the 1.09 support and the
1.10 resistance. The market might be waiting for the US CPI data before
deciding where to go next. The current setup though, gives us two possible
scenarios:

• A break to the upside should lead to a rally into a
  new high.
• A break to the downside is likely to trigger a
  selloff into the 1.07 handle.

EURUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action with the pair bouncing around. There’s nothing
to do here other than waiting for the US CPI report and the trading setups to
guide the way.

Upcoming Events

Today we get the latest
US CPI report and the US Jobless Claims figures, while tomorrow we conclude the
week with the US PPI data.

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

Yields are lower and stocks are slightly higher but the dollar is finding itself in a steadier spot so far on the session. It was slightly softer earlier in Asia but now, we are seeing dollar pairs keep little changed with most trading flattish. That being said, the ranges for the day leave a lot to be desired. For example, EUR/USD is only stuck within a 28 pips range or so.

The aussie and kiwi are maintaining a light advance but off earlier highs, and the ranges are also relatively narrow against the dollar. In other words, it’s all still to play for in the trading day ahead.

The main focus is on the US CPI data release, so don’t expect any fireworks before we get to that. This will make the next few hours a rather inert one for European traders.

In the aftermath of the release, USD/JPY might hold some interest after yesterday’s break above the 145.00 mark. We’ll see if the pair can hold a break above that on the inflation numbers with key resistance then seen at the 50.0 Fib retracement level of the swing lower from November to December, seen at 146.07.

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