• S&P says pronounced downturn in labour market could push eurozone economy into recession
• ICYMI – HSBC have boosted its Brent oil forecasts higher for 2023 an 2024
• Dow Jones Technical Analysis – Key trendline got breached
• HSBC cut its forecast for China GDP growth in 2023 and 2024 – see the PBOC easing further
• Japan PM Kishida says excessive FX moves are undesireable
• Japan PM Kishida says on Tuesday he’ll instruct ministers to prepare an economic package
• US equity index futures getting smashed in Europe morning time
• Barclays month end rebalancing model is expecting solid US dollar buying
• Russell 2000 Technical Analysis – Key support got breached
• Germany’s 10-year bond yield rises to its highest since July 2011
• News wires reporting that the Russian government approves tweaks to fuel export ban
• Germany September Ifo business climate index 85.7 vs 85.2 expected
• ECB Villeroy: rates says should remain at this level for sufficiently long period of time
• Bank of Japan Gov Ueda says the Bank won’t directly target FX in guiding monetary policy
• ECB’s De Cos says must avoid both insufficient and excessive tightening
• ECB Villeroy: risk of doing too much & risk of doing too little now symmetrically balanced
• Coal mine fire in Southern China’s Guizhou Province kills 16 people
• Gold Technical Analysis – The uncertainty remains very high
• Bank of Japan Governor Ueda says important for FX to move stably reflecting fundamentals
• European Central Bank’s Kazaks says Bank’s hike in September may allow a pause in October
• BOJ Dep Gov Uchida says need to closely watch FX markets
• More from Bank of Japan Governor Ueda: Aware of the impact of weak yen on firm earnings
• Brent oil price could surge as high as US $150 / barrel says JP Morgan
• Goldman Sachs says in the middle of the worst seasonal equity period of the year right now
• S&P 500 Technical Analysis – Key levels in play
• ECB speakers for Monday 25 September include Villeroy, Schnabel, and President Lagarde
• Bank of Japan Governor Ueda speech, full text. Patiently maintaining monetary easing.
• Beijing-based developer China Oceanwide Holdings declared bankrupt in Bermuda
• Singapore August inflation data: Headline CPI +4.0% y/y (expected was also +4.0%)
• FT reports that a senior Nomura banker has been banned from leaving mainland China
• FX option expiries for 25 September at the 10am New York cut
• Trade ideas thread – Monday, 25 September 2023 – Europe / UK session
• Forexlive Asia-Pacific FX news wrap: China property worries return

Rising
yields once again sent equity indexes lower. After a small gain
during Asia time US equity indexes tumbled sharply lower during the
European morning. The USD rose, most notably against EUR, GBP, CHF
and JPY. AUD, NZD and CAD didn’t drop nearly as much.

Data
flow was very light. We did get the September update for the German
Ifo indexes, still at very subdued levels.

There
were plenty of central banker comments, Villeroy, de Cos, and Kazaks
from the European Central Bank while Bank of Japan Governor Ueda
and Deputy Governor Uchida hit the news wires also. Ueda and Uchida
made some remarks aimed at supporting the yen. They were joined by
Japanese Prime Minister Kishida attempting the same. USD/JPY shrugged
all of it off to trade higher.

US equity index futures were slammed lower:

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

S&P analysts are wary of a deteriorating jobs markets in the Eurozone.

Reuters conveying just the headline with not further detail at this stage.

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

HSBC raised its forecast for Brent oil
prices in 2023 and 2024

• forecast is $90/bbl in Q4 2023
• forecast is $82.50 for the 2024 year, that’s up $7.50

Citing:

• Oil demand from China will continue to support the price
• Saudi supply cuts will remain unit Q2 2024

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

Week Ahead 25-29th September

• Mon: German Ifo (Sep), US National Activity Index (Aug), German State CPIs (Sep)
• Tue: Swedish PPI (Aug), US Consumer Confidence (Sep), New Home Sales (Aug) Richmond Fed (Sep)
• Wed: Spanish Parliament PM Vote re. Feijoo (TBC), CNB Policy Announcement, BoJ Minutes (Jul); German GfK (Oct), Swedish Consumer Confidence (Sep), EZ M3 (Aug), US Durable Goods (Aug)
• Thu: Banxico Policy Announcement, CBRT Minutes (Sep); EZ Consumer Confidence Final (Sep), German HICP Prelim. (Sep), US PCE Prices Final (Q2), IJC (w/e 18th Sep)
• Fri: Chinese Caixin PMIs (Sep), UK GDP (Q2), German Import Prices & Retail Sales (Aug), Swiss KOF (Sep), German Unemployment (Sep), Norwegian Unemployment (Sep), EZ Flash HICP (Sep), US PCE Price Index (Aug)

NOTE: Previews are listed in day order

Spanish Parliamentary Vote (Tue/Wed): People’s Party leader Feijoo has been given the first mandate by the King to attempt to form a government following the July election when neither Feijoo nor incumbent PM Sanchez were able to get near a working majority. As it stands, Feijoo is unlikely to have the 176 seats required for an outright majority within Congress and therefore his opportunity looks forlorn. If he does fail, then incumbent Sanchez will be provided with a chance to form a government in October/November, but again the PSOE leader is not expected to be able to hit the majority mark. In the scenario that both challengers fail, then the King could give others a mandate to form a government or allow one/both of them to try again. If a second attempt occurs, then the threshold is lowered to just a simple majority, but this is still deemed to be unlikely unless Feijoo can secure the 172 votes he is targeting vs. the opposition’s likely 170, writes Politico, and convince the Junts separatists to abstain. Given the uncertainty in projecting how many seats each camp will be able to secure and whether any of the separatist groups can be convinced to come on side or at least abstain, the most probable next course of action is another general election, which would likely occur in the first few months of 2024.

Banxico (Thu): The prior Banxico meeting saw the central bank leave rates unchanged, as expected, while it reiterated its guidance that it considers it will be necessary to maintain the reference rate at its current level for an extended period. Therefore, it is likely that Banxico will keep rates unchanged at 11.25% once again on Thursday. However, there will be particular attention to the guidance at this meeting. The latest August inflation data saw the 12-month headline and core metrics cool from the prior, in line with expectations. Meanwhile, the latest half month September data saw headline M/M cool marginally from the prior, as did the Y/Y. The M/M core however accelerated a touch but was in line with expectations, while the Y/Y core eased from the 1st half of August. Economic activity in July meanwhile slowed and missed analyst expectations. Analysts at Pantheon Macroeconomics expect Banxico guidance to change on the back of the data, and they see the September meeting as a prime opportunity for them to do so. Pantheon also believes that the Banxico will be able to start cutting rates gradually in late Q4.

CBRT Minutes (Thu): The CBRT opted to match market expectations with a 500bps hike to 30%. The Bank said tightening will continue until a significant improvement to the inflation outlook is achieved, and will be further strengthening as much as needed in a timely and gradual manner. The CBRT also said it will continue to simplify and improve the existing micro and macroprudential framework. The release noted inflation readings were above expectations in July and August. Analysts at CapEco suggest the central bank is “now doing what many investors had hoped they would by raising interest rates sharply and taking a more serious stance against inflation”, and “All of this is helping to maintain investor optimism in the policy shift and keeping Turkey’s sovereign dollar bond spreads near multi-year lows.” CapEco suggests a lot more tightening needs to be delivered, as the desk expects rates to rise to at least 35% by year-end.

China Caixin PMI (Fri): The PMIs will be released at a time when Chinese markets will be enjoying an 8-day-long holiday for the Mid-Autumn Festival, spanning from September 29th to October 6th. Thus, Chinese assets will not receive a chance to react to the data, although the surveys could have a macro impact as another gauge of economic conditions. In terms of the August PMIs, Manufacturing printed at 51.0, Services at 51.8, and the Composite at 51.7. The release also comes after a slew of stimulus to prop up the ailing economy. In terms of recent commentary, the NBS stated that the economy saw accelerated demand, but added that domestic demand remains insufficient and the foundation of economic recovery needs to be consolidated, whilst adding that the domestic economy is recovering, but still faces difficulties and China should focus on expanding domestic demand.

EZ Flash CPI (Fri): Expectations are for September Y/Y HICP to fall to 4.6% from 5.2%, with the super-core metric seen slowing to 4.9% from 5.3%. The prior report saw headline Y/Y HICP decline to 5.2% from 5.3% as energy prices prevented a more meaningful drop, whilst the super-core reading eased to 5.3% from 5.5%. This time around, Moody’s expects that energy prices will act as the “main downward pull on the headline rate”, whilst the core should also see declines on account of an unwinding of base effects in the transport services segment. From a policy perspective, the release will be unlikely to have a significant impact on pricing for the October meeting which assigns a circa 90% chance for the deposit rate to be held at 4.0%. However, should the release come in below expectations, and given the soft September PMI metrics, markets could begin to bring forward expectations of ECB rate cuts with the first 25bps reduction currently priced in by July next year.

US PCE (Fri): Analysts expect core PCE prices will rise by 0.2% M/M in August, matching the rate seen in July. Traders will be framing the data within the context of Fed policy to judge whether the central bank will follow through on its projections of another rate hike this year. While the Federal Reserve stood pat on policy at its September confab, it has retained the option of raising rates further. The central bank slightly raised its PCE projection for this year (from 3.2% Y/Y to 3.3% vs the 3.3% printed in the July data), but lowered its core PCE outlook (to 3.7% Y/Y from 3.9% vs the 4.2% in the July data). It is not until 2026 that the central bank sees both headline and core inflation back at 2.0%. Chair Powell said that while inflation has moderated somewhat, and expectations remain well anchored, the process of getting inflation down to 2.0% has a long way to go, and he said that the central bank would keep rates in restrictive territory until it is confident that inflation is moving back down to target. The central bank chief also warned that getting inflation back down would likely require a period of below trend growth, and some softening of labour markets. Powell was encouraged by the last three inflation reports, which he said were very good, but he wants to see more than just three good readings.

This article originally appeared on Newsquawk.

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

• Stocks can’t hold gains and close down. S&P and NASDAQ have worst week since March
• WTI crude oil futures settle at $90.03
• Stallantis: We have a real soluton on the table
• GM: We do have contingency plans, and will do what’s best for the company, and customers:
• The Fed’s Daly (non-voting member): We are closer to our destination
• Baker Hughes oil rig count versus last week.
• Shawn Fain: Biggest objective now is ending pay tiers
• European indices close mostly lower on the day. UK’s FTSE 100 ekes out a small gain.
• Feds Bowman: Further interest rate increases likely appropriate with inflation still high
• UAW to announce more strikes at GM and Stallantis parts and distribution centers
• Fed Collins: Despite encouraging recent data, inflation remains too high
• S&P global manufacturing PMI flash for September 48.9 versus 48.0 estimate
• ECB’s de Cos: Underlying inflation is now easing
• ECB’s Lane: 4% rate will do quite a bit to bring inflation to 2%
• Kickstart your trading day: A technical look at the EURUSD, USDJPY and GBPUSD
• Canada July retail sales 0.3% versus 0.4% expected
• Canada retail sales will be released at the bottom of the hour.
• The NZD is the strongest and the JPY is the weakest as the North American session begins
• ECB’s de Guindos: Risks to inflation are now balanced
• ForexLive European FX news wrap: Euro, pound drop on PMI misses
• BOJ’s Ueda: Sustainability of wage hikes the most important thing for inflation outlook
• BOJ’s Ueda: Could consider easy policy exit when achievement of 2% inflation is in sight

The NZD and the AUD are ending the day as the strongest of the major currencies. The JPY is the weakest. The latest central bank decision came before the US open, when the Bank of Japan in The rates unchanged but did say that they would consider easy policy exit 1 achievement 2% inflation is in sight and that sustainability of wage hikes the most important thing for the inflation outlook.

The USD end of the day mixed with gains versus the JPY (+0.55%), GBP (+0.45%), CHF and EUR, and losses vs the NZD (-0.49%), the AUD (-0.41%). The greenback was nearly unchanged versus the CAD.

For the trading week, the dollar index closed the week marginally higher by +0.27%. The DXY is a weighted currency index heavily weighted toward the EUR (57.6%), JPY (13.6%) and GBP (11.9%).

Looking at the major indices versus the US dollar, the green was mixed.

The USD was stronger vs the:

• EUR, +0.16%
• JPY, +0.38%
• GBP, +1.15%
• CHF, +1.07%

The USD was weaker vs. the:

• CAD, -0.33%
• AUD, -0.21%
• NZD, -1.08%

Versus the offshore yuan, the USD rose 0.27% this week.

The Federal Reserve this week kept rates unchanged at 5.5%. However, they did keep the additional tightening expectations for 2023, and raise the expected end-of-year rate for 2024 to 5.1% from 4.6% in June.

In the UK, the Bank of England came into the week with market traders expecting a 25 basis point hike. However, after lower-than-expected inflation data on Wednesday, the odds of a hike decreased to 50/50. The Bank of England did keep rates unchanged by a 5 – 4 vote margin. That helped to weaken the pound vs. the USD this week.

The Swiss National Bank was also expected to raise rates by 25 basis points at their quarterly meeting, but they too kept rates unchanged and that helped to weaken its currency versus the US dollar this week.

In the US debt market this week, yields moved higher for the 3rd consecutive week as traders priced in „higher for longer“ for the Fed funds target:

• 2-year yield rose 7.5 basis points to 5.112%
• 5-year yield rose 10.2 basis points to 4.569%
• 10-year yield rose 10.4 basis points to 4.438%
• 30-year yield rose 11.1 basis points to 4.529%

Although the longer end moved up the most, the 2-10-year spread still remains at -67 basis points continuing to signal a recession down the road. The 2 – 10-year spread has been negative since July 2022, reaching a low of -109 basis points in July 2023. Will it ever go positive? If the Fed is higher for longer, the logical way would be for the longer end to go up. The problem is mortgage rates are already up to 7.40%. If the 10-year yield rises another 67 basis points, you are talking about over 8% for mortgage rates all things equal. That would truly send the US economy into a recession which would then lead to lower short-term rates as the Fed is forces to ease.

A recession seems the only way out of the negative yield curve.

In the US stock market this week, the S&P and NASDAQ index had their worst week since March. With the NASDAQ index tumbling by 3.62%. The S&P fell -2.93%.

Crude oil prices this week closed down -0.54% or $-0.48 after extending to the highest level since November 2022 at $92.43.

Spot gold rose $1.37 or 0.07% (call it unchanged). Silver rose $0.52 or 2.276%.

There are some big stories still to be resolved including:

• The auto workers‘ strike
• The potential for a government shutdown at the end of the month

Each of these will get resolved at some point. The question is when and at what cost. Economically, the US PCE data will be released next Friday with core PCE expected to rise by 0.2%.

Adam is back next week. Thanks for your support and tolerance this week. Hope you have a great weekend.

Go Ducks beat the Buffs.

Go Tigers beat the Seminoles.

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

The major US stock indices traded above and below unchanged today in up-and-down trading, but each of the indices is ending the day in the red. A snapshot of the closing levels shows:

• Dow industrial average -106.60 points or -0.31% at 3393.83
• S&P index -9.96 points or -0.23% at 4320.05
• NASDAQ index -12.19 points or -0.09% at 13211.80

For the trading week, all major indices closed lower. The Dow industrial average has now declined 2 of the last 3 trading weeks. The S&P and NASDAQ index closed lower for the 3rd consecutive week.

For the NASDAQ index, the move lower this week was the largest decline since March 6. For the S&P index, it also had its worst week since March 6.

For the trading week:

• Dow industrial average fell -1.89%
• S&P index fell -2.93%
• NASDAQ index fell -3.62%

Hurting the tone in stocks are:

• Higher rates
• Concerns about government shutdown
• Higher energy prices
• Auto strikes
• Increased government debt

Technically, the Dow industrial average, NASDAQ index, and S&P index all our closing week below there 100 day moving averages.

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

The USDCAD traded down and up and down and up and back down and up this week (see hourly chart below). The high price on Monday was retested on Thursday. The low on Tuesday saw the pair, move to and through the 100-day MA (lower blue overlay line on the chart below at 1.3398) but failed. The next test of the 100 day MA on Wednesday, stalled near that level and moved higher.

The up-and-down week is ending with the price between the 100 and 200-hour MAs. The 100-hour MA is at 1.3463 and the 200-hour MA at 1.3497. The price is trading at 1.3482.

In trading next week, traders will take short-term bias clues from the 100 and 200-hour moving averages. If the price breaks higher and above the 200-hour moving average, the highest for the week, near 1.3525 and then the 50% midpoint at 1.3536 would be targeted.

Conversely, if the 100-hour moving average is broken, traders would look toward the low from today’s trading of 1.34214 followed by the 100-day moving average of 1.33985. The low for the week at 1.33778 if broken would open the door further downside momentum.

When the price goes up and down, it implies a market that is unsure of which way he wants to go. Next week we will listen to the technicals, to provide the clues to the story that the market wants to focus.

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

WTI crude oil futures settle at $90.03, up $0.40 or 0.43%. The high for the day reached $91.33. The low was at $89.31.

Brent crude prices settled at $93.27 down $0.03 or -0.03%

For the trading week, the price of crude oil is down marginally by -0.58%.

Looking at the daily chart, the price remains between retracement levels. On the downside, the broken 38.2% retracement of the move down from the June 2022 high, comes in at $86.72. On the top side, the 50% midpoint of the same move down comes in at $93.78. On the wide, those are the support and resistance levels for crude oil

Today the Baker Hughs data showed another decline of -8 oil rigs.

• The crude complex settled slightly stronger after a volatile day.
• This week the modest decline, ended a three-week positive streak due to concerns over Russia’s fuel export ban and potential future rate hikes.
• Kremlin announced the fuel export ban will remain until the fuel market stabilizes.
• WTI and Brent reached highs of USD 91.33/bbl and 94.64/bbl before dropping to lows of 89.31/bbl and 92.80/bbl respectively.

In other news:

• HSBC raised its Brent forecasts, citing:
  • Expected tight oil demand due to extended Saudi voluntary cuts.
  • Anticipation of the cuts lasting until 2024.
  • Continued record Chinese oil demand supporting prices in the near future.

A few Fed governors today expressed concerns toward the price of oil and its impact on inflation. The higher prices could also lead to lower demand, that leads to a correction lower.

Ultimately Time and again, when there is added focus on higher prices, the higher prices lead to lower demand, a slower economy, or often both. The price comes back down.

Then when the price is low, it does the opposite, spurring on more growth and increased demand and utimately higher prices.

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

• Still have not yet received a response to Thursday’s offer
• We have a real solution on the table.
• Offer includes a long-term solution for Belvidere
• The offer includes current full-time employees earning between $80,000 and $96,000 a year by the end of the contract

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

Headlines:

• France September flash services PMI 43.9 vs 46.0 expected
• Germany September flash manufacturing PMI 39.8 vs 39.5 expected
• Eurozone September flash services PMI 48.4 vs 47.7 expected
• UK September flash services PMI 47.2 vs 49.2 expected
• Euro area PMI takeaways
• BOJ governor Ueda: Will not hesitate to take additional easing measures if necessary
• BOJ’s Ueda: Sustainability of wage hikes the most important thing for inflation outlook
• BOJ’s Ueda: Could consider easy policy exit when achievement of 2% inflation is in sight
• The bond market continues to hog the spotlight
• UK August retail sales +0.4% vs +0.5% m/m expected
• UK September CBI trends total orders -18 vs -18 expected
• Spain Q2 final GDP +0.5% vs +0.4% q/q prelim

Markets:

• NZD leads, JPY lags on the day
• European equities lower; S&P 500 futures up 0.2%
• US 10-year yield flat at 4.482%
• Gold up 0.3% to $1,925.47
• WTI crude up 1.0% to $90.57
• Bitcoin up 0.2% to $26,651

It was a relatively lively session as the euro and pound came under the microscope amid the latest PMI data for September.

The French reading disappointed while the German reading reaffirmed a contraction in Europe’s largest economy during the quarter, though the latter was better than expected on the month. That saw a bit of a fall and rise in the euro, with EUR/USD moving down from 1.0665 to 1.0615 before holding around 1.0640-50 currently.

The pound found little comfort from the poor PMI readings, with the BOE already having seen the numbers before choosing to pause yesterday. GBP/USD was already slightly softer on the day before extending a drop from 1.2260 to 1.2235 before keeping around 1.2250 levels now.

The dollar continues to keep in a solid spot, sitting more mixed on the day as it is only lower against the commodity currenies.

The yen was also a feature as BOJ governor Ueda ran back on his remarks on a „quiet exit“ from two weekends ago, and that is seeing further pressure on the currency today. USD/JPY is up 0.5% to 148.25 as higher yields continue to keep the pressure on the yen as well.

In the bond market, the selling is hitting a bit of a pause after the poor PMI data today but nothing too significant. 10-year yields in the US dropped off to around 4.46% but are now back up to 4.48% and that continues to keep equities on edge. European stocks are lower today after the heavy selling in Wall Street yesterday but US futures are at least a little higher but still have to navigate through the US session later.

There will be US PMI also to watch out for and any surprises there could keep things rather interesting towards the end of the week. In that lieu, a downside miss will be of more impact than any upside beat I would say.

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