Global equity funds draw massive inflows as rate worries ease

FULL STORY

Global equity funds saw a significant uptick in demand in the week through Nov. 8 as investor sentiment improved following the decision of major central banks to keep policy rates unchanged.

A shift in rate hike expectations and a report from the U.S. Labor Department indicating a slowdown in job growth in October further eased treasury yields, loosening financial conditions.

Investors poured a net $5.63 billion into global equity funds during the week, registering their biggest weekly net purchase since Sept. 13.

This article was written by Ryan Paisey at www.forexlive.com.

Japan lobby head urges BOJ to normalise policy to live with interest rates

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An outspoken leader of a Japanese business lobby said on Thursday the central bank should unwind its easing programmes to live with interest rates although it may take a year to exit monetary stimulus.

Takeshi Niinami, chairman of Keizai Doyukai, who also heads Suntory Holdings Ltd, said the Bank of Japan „must normalise“ monetary policy so that it could help weed out incompetent firms and facilitate labour turnover towards growth industries.

• „The BOJ must make a move,“
• „There must be quite a lot of political reservation about completely abandoning them,“
• „That’s why the BOJ may be thinking it would be better off falling behind the curve.“
• „That should be taken as a message that the BOJ is leaving the YCC behind gradually,“
• „If it’s unwound all at once that would cause ripple effects though.“

This article was written by Ryan Paisey at www.forexlive.com.

Futures listless as markets await more policy cues

FULL STORY

U.S. stock index futures were muted on Thursday as uncertainty about when the Federal Reserve will start easing financial conditions kept investors on edge as they awaited further policy cues from central bank officials.

Signs of a weakening labor market and a tempering of the Fed’s hawkish stance at its last meeting have pulled U.S. Treasury yields down from multi-year highs, helping equities stage a stellar comeback from their October lows.

A majority of traders are betting that the Fed will keep interest rates unchanged this year, with odds of a cut of atleast 25 basis points in May standing at nearly 48%, according to the CME Group’s FedWatch tool.

This article was written by Ryan Paisey at www.forexlive.com.

The Dow Jones managed to hold into the last week
gains and consolidated near a key resistance as the first part of the week
didn’t offer any meaningful catalysts. The things should change today though as
we will see the latest US Jobless Claims data and given the recent weakness in
the labour market data, the market is likely to react strongly to this report.

Dow Jones Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Dow Jones erased
all the losses of the past couple of weeks and it’s now consolidating around a
key resistance where we
can find the confluence with the
trendline and the
61.8% Fibonacci retracement level.
This is where the sellers are likely to pile in to position for a selloff into
new lows with a great risk to reward setup.

Dow Jones Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see more closely the
bearish setup with the key resistance highlighted by the blue box. The price in
the first part of the week managed to break the high but erased the gains soon
after. The buyers are likely piling in here with a defined risk below the
trendline to position for another rally into the 35000 level. A break below the
trendline should invalidate the bullish setup and confirm the bearish one.

Dow Jones Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
recent price action is diverging with
the MACD right
when we are at a key resistance. This is generally a sign of weakening momentum
often followed by pullbacks or reversals. In this case, we got a pullback into
the previous higher low, but if the price breaks below it, the reversal would
be confirmed, and it would be another bearish confluence for the sellers.

Upcoming Events

Today we have the US Jobless Claims on
the agenda, while tomorrow it will be the time for the University of Michigan
Consumer Sentiment report. The market is likely to focus on the US Jobless
Claims given the recent weakness in the labour market data. Weak figures are
likely to weigh on sentiment and push the Dow Jones lower, while good readings
might be enough for the market to rally.

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

Fed’s Goolsbee Says Fed Will Need to Monitor Risks of Overshooting on Rates

FULL STORY

A sustained rise in long-term rates can ‘have a very substantial effect on real economic performance,’ the Chicago Fed president says

• “The historical evidence suggests that long rates, even more than short rates, have a very substantial effect on real economic performance in a number of predictable areas—construction, investment, consumer durables,”
• “If that is sustained, the Fed will have to think about the tightening impact of those credit conditions on economic performance, and would there be dangers of overshooting.”

This article was written by Ryan Paisey at www.forexlive.com.

The Newsquawk European FX Update: Greenback grinds back up again after brief retreat

FULL NOTE

DXY/EUR/JPY

The Dollar and index suffered a setback on Wednesday, but nowhere near the magnitude of last week’s post-FOMC relapse that saw the latter slide to 106.61 from a 107.11 peak in response to what was deemed to be a dovish press conference from Fed Chair Powell, on balance. Indeed, the DXY managed to settle just above 105.50 within a 105.87-44 range even though US Treasuries continued to bull-flatten and the 10 year yield probed the psychological 4.5% level irrespective of a so-so T-note auction that priced almost 2 bp higher. Moreover, the aforementioned close was positive from a technical perspective as the index held fractionally above a pivotal Fib retracement and kept its recovery on track. Consequently, the Buck stopped the rot against the Euro and maintained upward momentum vs the Yen with little deviation via comments from the ECB or BoJ. To recap, de Guindos said the Bank needs to be prudent and cautious due to risks over the inflation outlook over the next few months, while Governor Ueda repeated that the Bank will keep YCC and NIRP in place until necessary, to hit the 2% inflation target in a sustained manner amidst a raft of remarks – see 7.05GMT, 8.37GMT and 8.43GMT posts on the Headline Feed for further details. Eur/Usd was contained between 1.0715-1.0695 confines, Usd/Jpy mostly elevated within 150.78-151.09 bounds and both pairings conscious of more hefty option expiry interest given 2.1 bn rolling off at 1.0700 and 1.3 bn at 151.00 respectively. Meanwhile, the DXY meandered from 105.46 to 105.65 awaiting jobless claims and more Fed rhetoric, including Powell at the IMF.

GBP

Sterling seemed destined for another UK debt-related tumble before Gilts reversed course and the short end of the curve retraced more gains on the back of latest comments from BoE’s Pill. In short, he seemed to pull back from ‘guidance’ for a policy pivot around the middle of next year and stressed the importance of maintaining restrictive rates for an extended period instead (see 8.45GMT and 9.21GMT headlines for more). Cable popped back over 1.2300 from 1.2271 and the Eur/Gbp cross retreated from 0.8719 to just under 0.8700.

NZD/AUD/CAD/CHF

The Kiwi’s revival looked more corrective than fundamental following its downturn in line with NZ inflation expectations yesterday, but Aud/Nzd tailwinds were supportive as the Aussie lagged in sympathy with the Yuan in wake of softer than forecast Chinese inflation metrics. Hence, Nzd/Usd fastened its grasp on the 0.5900 handle as Aud/Nzd drifted down from 1.0842 to 1.0794 and Aud/Usd loosened its grip of 0.6400. Elsewhere, scant solace for the Loonie from a tame rebound in crude prices or impetus from hawkish content in the BoC minutes, like the line reading that some members of the GC felt the rate would more likely than not need to increase further, as Usd/Cad continued to straddle 1.3800. Last, but not least, the Franc pivoted 0.9000 in the face of retracement in bonds and reversion to curve steepening, but Usd/Chf was capped by 1.3 bn expiries spanning 0.9010-25 pre-SNB’s Schlegel and Moser.

NZD/AUD/CAD/CHF

The Kiwi’s revival looked more corrective than fundamental following its downturn in line with NZ inflation expectations yesterday, but Aud/Nzd tailwinds were supportive as the Aussie lagged in sympathy with the Yuan in wake of softer than forecast Chinese inflation metrics. Hence, Nzd/Usd fastened its grasp on the 0.5900 handle as Aud/Nzd drifted down from 1.0842 to 1.0794 and Aud/Usd loosened its grip of 0.6400. Elsewhere, scant solace for the Loonie from a tame rebound in crude prices or impetus from hawkish content in the BoC minutes, like the line reading that some members of the GC felt the rate would more likely than not need to increase further, as Usd/Cad continued to straddle 1.3800. Last, but not least, the Franc pivoted 0.9000 in the face of retracement in bonds and reversion to curve steepening, but Usd/Chf was capped by 1.3 bn expiries spanning 0.9010-25 pre-SNB’s Schlegel and Moser.

This article was written by Ryan Paisey at www.forexlive.com.

Crude Oil fell to a 3-month
low as the market focus switched from the geopolitical risk in the Middle East
to the macro risk of a recession as the PMIs of major economies continue to
contract and the US labour market data started to show more clear weakness. If
we don’t get any bigger escalation in the Middle East that could threaten to
disrupt supply, Crude Oil is likely to reach even lower price as while the
global economy continues to weaken.

WTI Crude Oil
Technical Analysis – Daily Timeframe

On the daily chart, we can see that Crude Oil fell
back into the range between the $83 resistance and $64
support. The bias has turned bearish again following this technical break below
the $83 level and the weakening US labour market data. The price is now around
the swing level at $78 and from a risk management perspective, the sellers
would have a much better risk to reward setup if the price pulled back into the
resistance where we can find the confluence with the
trendline, the red
21 moving average and the
50% Fibonacci retracement level.

WTI Crude Oil Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that Crude Oil has
been selling off with almost no pullback since Monday. The buyers are likely to
step in around this swing level to target a pullback into the minor trendline
around $80 level where we can also find the 50% Fibonacci retracement level and
the red 21 moving average for confluence. That’s where the sellers are likely
to pile in with a defined risk above the trendline to position for a drop below
the $78 level with a better risk to reward setup.

WTI Crude Oil Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we
have another minor trendline defining the current bearish momentum. A break
above this trendline should trigger more buying pressure and probably lead to
the pullback into the $80 level. The sellers might even lean on this trendline
with the red 21 moving average for confluence, but the risk to reward would be
much worse.

Upcoming Events

This week is pretty empty on the data front with just
the US Jobless Claims tomorrow and the University of Michigan Consumer
Sentiment on Friday being the only notable events. The market is likely to
focus on the US Jobless Claims given the recent weakness in the labour market
data. Strong readings are likely to support Crude Oil, while weak figures may
add even more pressure as the recessionary trade is likely to gather steam.

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

ECB’s Nagel dismisses rate-cut talk, calls inflation ‚greedy beast‘

It is far too early to talk about cutting the European Central Bank’s interest rates as inflation is a „very greedy beast“ that is hard to beat, ECB policymaker Joachim Nagel said on Wednesday.

• „This discussion (on when interest rates can be cut) is not helpful… it is much, much too early,“ he told an event in London. „Inflation is a greedy beast, a very greedy beast,“
• „When we have to deal with a beast that is so stubborn, we have to be even more stubborn.“

This article was written by Ryan Paisey at www.forexlive.com.

The Newsquak US Market Open:

Equities in the red, USD bid & GBP lags as Gilts extend gain; Fed’s Powell due

• European bourses post modest losses whilst the NQ & ES teeter around the unchanged mark, RTY lags slightly.
• Bonds extended gains with Gilts outpacing counterparts though ultimately fell short of 96.00 level, with the complex now off best levels & USTs lower.
• USD bid with the index printing a 105.87 high, putting downward pressure on G10 peers; GBP bearing the brunt & largely attributed to outperformance in Gilts.
• Crude continues to crumble but has lifted from lows most recently amid a magnitude 5 earthquake in western Texas
• Looking ahead, highlights include US Wholesale Prices, NBP Policy Announcement; BoC Minutes, Speeches from Fed’s Powell, Williams, Barr & Jefferson; BoE’s Bailey; Supply from US. Earnings: Telecom Italia, Ralph Lauren, Kellogg, Disney, BlackRock, Warner Bros Discovery & Disney.

This article was written by Ryan Paisey at www.forexlive.com.

ECB policymakers keen to cool euphoria over inflation drop

FULL STORY

The European Central Bank needs to see further progress in
dampening inflationary pressures, and companies along with governments need to
chip in to prevent more policy tightening, ECB policymakers said on Wednesday.

Policymakers speaking at various venues across Europe
appeared keen to cool any euphoria about the rapid fall in prices, arguing that
the overall picture was more mixed. Some policymakers even argued that further
rate hikes should not be taken off the table.

• „You do see some progress (in underlying inflation),
  but not yet enough,“ ECB chief economist Philip Lane said in Riga
• „The ‚last mile‘ before we reach our inflation target
  may well be the hardest,“ Nagel said in London.
• „It is far, far too early in my view to start talking
  about whether we need to start reducing or cutting rates… And also it is too
  early to declare that we have reached the top of the ladder“ of interest
  rate hikes, Makhlouf said in Dublin.

This article was written by Ryan Paisey at www.forexlive.com.