Daily analysis 23.09.2022
The global central bank raised policy rates without hesitation. Yesterday, the Swiss National Bank (SNB) ended almost eight years of negative rates with a 75bps rate hike. Also, Bank of England (BoE) increased its key interest rate to %2.25. In addition, three members wanted more, and the bank will start selling gilts next month. Besides, the Norway Central Bank (Norges Bank) lifted rates to %2.25 by a 50bps rate hike. Indonesia was surprised with a greater than expected to increase in its key rate to %4.25. On the contrary, the Central Bank of the Republic of Turkey decreased its policy rate to %12.00 with a 100bps cut. And what is more, the Bank of Japan (BoJ) intervened in the foreign exchange market today to buy Yen for the first time since 1998. The bank keeps ultra-low rates with dovish policy guidance.
This morning, Dollar Index (DXY) is around the 111.750 level. The real rate for 10Y in US increased 130bps. After FED’s ultra-hawkish guidance on interest rates, risk appetite in the market turns negative. In terms of the economic calendar, eyes will keep on PMI data. As previous data for US PMI was released at 51.5. The data is expected to release with a downward bias because the economy is slowing down with a high-interest rate and lower demand from households.
The dollar index (DXY) performance remains firm. The first day of the week, DXY touched the 114.60 levels, pushing major pairs into fresh multi-year lows. Technically, it shows overbought conditions, but no offering signs of correction. Yesterday, FED officials continued to hawkish expressions and then US Treasury yields lifted. This morning, UST 2Y yield is seen at %4.28 vs UST 10Y at %3.85. The spread for US2Y-10Y comes down -43bps from-52bps.
In addition, OECD downgrades world GDP forecast from %2.8 to %2.2 in 2023. US GDP is expected to slow %0.5 in 2023 while growth in Eurozone is seen only %0.25. Today, we will focus on Lagarde speech and US Durable goods order and US consumer confidence. US consumer confidence September’s reading could be positive because of that gasoline prices decrease, and labor conditions remain tight.
Daily analysis 29.09.2022
The dollar index (DXY) is still on the increase because FED is set to continue with its hawkish approach. In Asia session, DXY touched the 114.70 levels, pushing major pairs down. In other words, FED projects higher rates for longer set to keep the dollar bid. Hence, US Treasury yields continue to raise. This morning, UST 2Y yield is seen at %4.27 vs UST 10Y at %3.97. The spread comes down for US2Y-10Y -29bps from-43bps swiftly.
Today, both Lagarde and Powell have a speech in different events, but it is not related to monetary policy. Yesterday, US Conference Board Consumer Confidence Index released, and the data rose to 108.00 from 103.60, beating estimates at 104.60. Today’s economic calendar seem stationary.
In addition, the IMF said related to the UK’s unfunded tax cuts that it needs a revision. By the way, the chancellor Kwarteng will meet with Wall Street executives today.
Daily analysis 29.09.2022
Yesterday, the Dollar Index (DXY) widened its appreciation in European session. Then, DXY hit a record high of 114.78. Yet, after Wall Street’s opening it retreats towards 112.60 level. Thus, the sentiment in the market turns positive mode and major currencies take breath in the least. Besides, several FED officials made explanations that they are waiting for Fed funds rate between 4.25% and 4.75% in the first quarter of 2023.
In this morning, DXY was last seen at 113.50 and 2Y10y yield differential hovered around 36bps, widening from 32bps seen this time yesterday. In addition, the Bank of England (BoE) would buy bonds on “whatever scale is necessary” to calm markets, after the collapse in sterling to the lowest level in history on Monday and a dramatic rise in the UK’s borrowing costs to the highest level since the 2008 financial crisis.
Today, the investors’ focus will be on German inflation, expected to have raised by 9.4% YoY in September. Also, eyes are very much on the third print of the 2Q US GDP release before the highly scrutinized PCE core tomorrow.
Daily analysis 30.09.2022
Today is the final trading day of the week, month and quarter. Both technically and fundamentally, the market sentiment could be more volatile. In other words, the jump in risk assets in the last few days is remarkable because there is nothing change fundamentally on the side of FED. Still FED governors make hawkish speech, and the US Treasury yields move upwards.
In the Asia session, the overnight move amid fears of FX intervention by Bank of China (PBoc)after state banks were whispered to sell massive amount of USD to support the yuan. In fact, the central bank said in a Chinese statement on its website late Wednesday “Do not bet on a one-sided appreciation or deprecation of the renminbi exchange rate”. In addition, potential recovery for the GBP should PM Truss make credible modifications to her mini budget could help anchor the GBP and broader FX sentiment. To make it clear, Truss is said to hold emergency talks with the Office of Budget Responsibility today according to the Guardian.
In the market, DXY is trading around 112 level. 2Y10y yield differential hovered around 33bps. Today, the investors’ focus will be on EU Inflation and the PCE core deflator. Any upside surprise could raise fears of more aggressive tightening again and that could be supportive of the USD.
Daily analysis 03.10.2022
Last week, we saw unprecedented volatility for the British pound following the presentation of the highly controversial mini-budget. The pound was driving in a new all-time low of 1.0340 at the beginning of the week, but the parity became reversed its direction and regained at 1.1200 early Friday since Bank of England (BoE) decided to intervene in the bond markets on Wednesday.
Today, DXY was last seen at 112.20. The index is gathering strength at the beginning of the week because the PCE core deflator surprised to the upside at 0.6%m/m vs. the previous 0.0%. Year-on-year, the inflation measure rose %4.9, accelerating from the previous %4.7 (also revised higher). US 10Y treasury is now trading at %3.78, but last week it raised %4.00 for the first time since 2008. The spread difference between 2y-10y is again on the increase with a 42bps.
This week, the investors focus on US nonfarm payrolls and wage growth releases on Friday. Before PMI data will be updated by the US, Eurozone, and U.K. In addition, the Reserve Bank Australia (RBA) will likely raise the cash rate to %2.85 from %2.35. Also, the Reserve Bank of New Zealand (RBNZ) is likely to hike by another 50bps on Wednesday. The official key rate is now %3.00 and the market expects %3.50 with a 50bps rate hike.
Daily analysis 04.10.2022
Weak PMI data, UK U-turns on tax plans and RBA rate decision
The dollar index softens because of weaker US data. ISM manufacturing for September decreased more than expected to 50.9 from 52.8. Also, UK Chancellor Kwasi U-turns on plans to scrap %45 tax rate on income above £150.000. Then, gilts regained and 10Y- US treasury yield came down nearly 25bps to %3.62 level. The pullback in treasury yields led to increase in risk appetite. However, FED Williams took a stand that FED still has ‘significant ways’ to hike rate. In addition, FED Barking warned of inflationary headwinds in the post pandemic era.
In addition, PMI releases from other regions indicated increasing weakness. The S&P Global Eurozone Manufacturing PMI was revised lower to 48.4 in September of 2022 from a preliminary of 48.5 and below 49.6 in August, pointing to the biggest contraction in factory activity since June of 2022. There were further slides in both output and new orders, linked to high energy prices in some cases, while many firms downwardly adjusted their operating schedules in line with lower order books.
In this morning, we followed the Reserve Bank of Australia (RBA) interest rate decision. RBA raised the official cash rate (OCR) by 25bps from %2.35 to %2.60.
Daily analysis 05.10.2022
RBNZ rate hike, FED still hawkish and Labor data vs US Dollar
This early morning, The Reserve Bank of New Zealand (RBNZ) raises the official cash rate 50bps to %3.50. Economists agree the cash rate hikes will continue until the RBNZ is confident in seeing enough restraint. In other words, RBNZ maintains its hawkish tones to tackle inflation which rose to %7.3 in July, a 32-year high. In the market, we see optimistic pricing for two-days on currencies, but the outlook does not change. After RBNZ rate hike decision, the market realize that FED is still hawkish, and we are following the labor data deluge that starts today with US ADP employment change. Tomorrow, the market will focus on initial jobless claims and Nonfarm Payroll (NPF) on Friday.
In addition, there are already some market calls for FED to pause very soon and Dollar Index (DXY) runs into difficulty. Back on DXY index daily chart, the price was last at 110.20. Support is now seen at 109.30. Momentum has turned bearish. Resistance at 112.75 before 113.80. Also, US treasury yields starts the day positive and 10Y treasury yield is trading above %3.65. The real rate for 10Y is around 145bps now.
Focus on Nonfarm Payrolls, BoE’s Ramsden speaks
Today, the Dollar Index (DXY) continue to raise persistently and is trading now below 112.40 level. Also, US treasury yields are on the increase. The 10y US treasury yield is at %3.85 and the real yield for 10y reach 165bps. The market focus on US Nonfarm Payroll (NFP) data It will be released at 15.30 (GMT+3) and the consensus is 265K in Sep vs 315K in Aug. In addition, the unemployment rate is expected to print the same reading with previous month, and it was %3.7. The key data for today is related to NFP. If the data comes below 200K, then the market agree that the economy is slowing, so it is creating jobs at a pace lower than the covid era. Thus, FED should be slow to hike the rate for November meeting. In other words, it would be sufficient a 50bps rate hike for the rate decision. What else, if the data comes above 300K, the market would be more volatile because DXY would rise immediately, and FED continue to rise the rate aggressively. Besides, there are some other key events today. BoE’s Deputy Governor Ramsden speaks at event. Also, Fed’s Williams speaks another event for today.
Onshore market close in US, DXY continue to rise after strong US NFP data
Last week, the US nonfarm payroll (NFP) report indicated that U.S. firms continued to hire more people in September. Thus, the unemployment rate decreased from %3.7 to %3.5. All things are taken into consideration, US labor data is still strong and give way to the FED to tighten monetary policy for a while.
In addition, stronger than expected NFP give way to a lift for the Dollar Index (DXY). Today, DXY is trading around 113.00 level. Onshore market in US is closed today because of Columbus Day.
This week, the investors focus on US inflation data on Thursday. If the inflation continues to rise, the FED would be aggressive for the next meetings. On Friday, US retail sales data will be released. The data may increase for September because of auto sales jump. On Wednesday, the FED minutes and September PPI will be announced. It is significant for the investors to understand the outlook for the next meetings.
FED officials continue to speak Hawkish, Global recession at the door
This morning, the dollar index extends its upside momentum and US treasuries continue to raise because of hawkish FED. Risk sentiments is still prudent in the market. Fed speakers continue to defend aggressive rate hike. Yesterday, Chicago FED president Evans had a speech at a National Association for Business Economics conference in Chicago. He said FED needs to quickly get interest rates to a level where policymakers can feel comfortable pausing in order to reduce the risk of overshooting. Also, he stated that front-loading was a good thing, given how far below neutral rates were. But ‘overshooting is costly too, and there is great uncertainty about how restrictive policy must become.’
Also, the warnings come related to global economy growth from the World Bank and IMF. Their chiefs said that the risk of recession in the global economy is growing due to rising interest rates and slowing economies around the world. Furthermore, the coronavirus pandemic compelled many countries to get more borrowing, and they are already facing or at risk of debt distress amid rising global inflation and hiking interest rates.
Today, the jobless rate in the UK decreased to %3.5 in the three months to August of 2022 which is new low since 1974. In the rest of the day, the investors follow the speech of central banks’ officials to understand the opinion for the next meetings.
BoE’s governor Bailey warns the Gilts investors, IMF announced Economic Outlook Report
Yesterday, BoE’s governor Bailey warned for Gilt investors, and he stated that the emergency support package will end on Friday. He told especially for pension funds that they should rebalance their positions because the support which is provided by BoE is not permanent, just for financial stability. The risk sentiment in the market is complicated. The rise on Bond yields in US continues with the growing recession concerns. US 10-year Gilt is trading near %3.90. Also, the Dollar Index (DXY) remains firm because of FED officials’ hawkish speech.
In addition, The International Monetary Fund (IMF) announced the economic Outlook Report. According to report, global growth is forecast to slow to %3.2 in 2022 and %2.7 in 2023. Furthermore, U.S. Treasury secretary Janet Yellen said the U.S. economy has slowed down after a strong recovery, but jobs reports indicate a resilient economy. She also said that inflation in US is too high and that lowering it is a priority for the Biden administration.
Today, the industrial production data in EU will be released. Also, ECB’s president Lagarde speech will be followed by the markets. Again today, producer inflation data will be announced in U.S. It is expected to increase to %0.2 from %-0.1 and PPI (Yoy) data, is expected to decline to %8.4 from %8.7. Lastly, the FOMC minutes which held on 20-21 September will release at the evening hours.
FED minutes still hawkish, today’s key data is US September Inflation data
Yesterday, FED released the Minutes of the latest meeting. Policymakers agreed that they continue to tighten monetary policy in order to control elevated inflation. Aside from that, there was not much of a surprise. Today’s key data is US inflation report. The headline inflation is expected to have risen by 8.1% YoY (previous 8.3%). On the other hand, core inflation is expected to have ticked higher toward its recent multi-decade high of 6.5%. A main source of this lift is likely stemming from soaring rents, which is contributing to the largest weight of the metric - housing. If the upward risks still go on, FED will continue further policy hikes.
Also, a 75-basis point Fed rate hike is largely priced in for November FOMC with the probability of %83.7 at CME, followed by another 50bps rate hike in December. A strong inflation print could raise the December rate hike expectations to 75bps. That may lead to increase the US Dollar and Treasury yields.
Today, the dollar Index (DXY) continue to remain firm. At the same time, US treasuries’ yields are on the increase after hawkish FED minutes. For FED, fighting inflation is still on the priority.
Lastly, in Japan producer inflation rose by %9.7 YoY in September 2022, but the market consensus is at %8.8 and following an upwardly revised %9.4 for August data. Still there is an upward risk for producer inflation because of that commodity prices are on the increase thanks to Russia-Ukraine war. Also, the yen rapidly declines.
US Inflation announced hotter than expected, the US Dollar the safest currency until global slowdown over
Yesterday, the US Consumer Price Index raised %8.2 YoY in September. Additionally, annual core inflation in US lifted to %6.6 in September from a year earlier. After the data released by the US Bureau of Labor Statistics (BLS), the Dollar index touched fresh weekly high level 113.87 and US10-year treasury yield rockets above %4. Also, yield 2-year note was above %4.52.
Furthermore, odds for a 75 bps November Fed rate hike have spiked to %95.4 today. In other words, the market is pricing in more 75 bps rate hikes coming up. Until the end of year FED has two more times FOMC meeting which holds on November 2-3 and December 14-15. If the inflation is ever rising, the chances are clearly higher for a 100bps hike. That would help push rates toward US10-year yield %4.4 target.
On the other hand, China consumer inflation released in this morning and the inflation hit two- year high in September which rose %2.8 on annual basis. Due to the fact the People’s Bank provide liquidity measures to increase on spending during the mid-Autumn festival. The facilities helped support retail prices, although factory-gate inflation continued to soften near 20-month lows. In addition, Japanese Chief Cabinet Secretary Hirokazu Matsuno said that ‘North Korea launched one ballistic missile early Friday’.
Today, the dollar Index (DXY) is hovering 112.55 level. Firmer yields, hawkish FED bets and geopolitical uncertainty in Ukraine support the US dollar’s demand. Until the current slowdown in global market ends, DXY will stay powerful because the investors adopt the US dollar the safest currency. Thus, according to Citibankgroup Global Markets Inc. says Dollar peak will only come when world economy recovers.
US Core inflation still on the increase, UK politic and economic crisis increase. Also, Xi Jinping talked on China’s 20th Communist Party Congress.
Last week, the US core inflation climbed to %6.6 from previous %6.3 year-on-year. The strong reading on core inflation likely showed that a hawkish discourse from FED will continue for the foreseeable future. Also, headline inflation slowed less than expected to %8.2 year-on-year in September (August %8.3). Now, FED futures are pricing a 75bps rate hike for November FOMC meeting with %97 probability on CME Fedwatch Tool. It is even priced for a 75bps rate hike for December meeting with %70 chance, but it was 50bps dots plot projections for December. In addition, US 2-year treasury bond is hovering %4.50, and US10-year treasury bond is trading closely %4.00.
Hawkish comments from ECB officials continue to provide gradual support for EUR. Thus, Bundesbank President Nagel said that ECB would begin softening its balance sheet in early 2023.Also, Dutch Central Bank Chief Knot said that "Once we will have reached neutral territory with our policy rate, it makes sense to consider the roll-off of asset purchases by limiting reinvestments”. In short, quantitative tightening is approaching in Europe region.
In UK, Finance Minister Kwarteng was fired earlier on Friday after political pressure and market chaos. Today, UK’s chancellor will make a statement on medium-term fiscal plan. This statement will be crucial to getting the crisis somewhat stabilized. Also, Xi Jinping requalified 20th Party Congress and he said that he would prioritize the national security over growth.
Today, the economic calendar is so silence. The US data NY Empire State Manufacturing Index for October will be followed closely.
Daily analysis 18.10.2022
UK U-turn completed, European Economic Sentiment will followed
Yesterday, new UK Chancellor Hunt announced that the UK government reversed most of Liz’s original tax plan which was declared on 23 September. When PM Liz was elected, she immediately released mini-budget which are tax-related measures. Then, the market is drifted into a state of chaos and the pound depreciated dramatically. After that ex-Finance Minister Kwarteng bear the cost by firing earlier on Friday after political pressure and market chaos. For now, the market in UK is trying to stabilize, but still political risk is on the table. In other words, there are still growing calls for Liz’s resignation because she lost the confidence of the UK people and others.
In addition, risk sentiment was positive in global markets due to UK U-turn step. Thus, the dollar index softened to 111.90 level. Also, the weaker empire manufacturing contributed to fall on the dollar. On the other hand, US10Y is still hovering around %4.00. The difference between US2-10year bond is nearly 45bps.
Today, Germany and European ZEW survey will be released. Also, ECB’s Scnabel have a speech today. In America, capacity utilization for September will be released and it is expected %80 (Aug: %80). Lastly, FED Bostic will participate in panel discussion.
Daily Market Analysis 18.10.2022
DXY is mentally strong, BoJ makes an intervention, European economy have in difficulties, Uncertainties’ in the UK economy still on the agenda.
The Dollar Index is mentally strong. Yet, the market sentiment is mixed. US10-year is trading again above %4.00. The spread between US2-10Y become narrow by 42bps.
Japan Central Bank (BoJ) intervene the currency market yesterday. The pair is holding its head up above 149.00 level around 32-year high. Yet, there is no reversal signal for Yen. Today, the market sees another intervention because USDJPY may test 150.00 psychological level. Besides, Japan Finance Minister Suzuki said that they cannot tolerate excessive currency moves driven by speculators. They are closely watching currency moves with a high volatility.
Furthermore, Germany ZEW Economic Sentiment released yesterday. The data came -59.2 from -61.9 which is slightly seen recovery in German economy. Yet, the current Situation index sharply decreased from -60.5 to -72.2 Also, European region ZEW Economic Sentiment enhanced slightly from -60.7 to -59.7. But, the current Situation index sharply tumbled to -70.6 In short, the economic situation is downhill at the way for Eurozone.
In addition, inflation in New Zealand lifted to %2.2 QoQ in Q3, a well-above expectation %1.60. The key driver for the rising in prices is mainly food and housing. Shortly, inflation is still o the increase everywhere in the world without stopping.
Today, UK inflation will be released. It is expected to announce %10.0 YoY. Increased energy prices are the main reason things are getting more expensive. Also, the war in Ukraine gave way to food prices going up because of the amount of grain available. At the evening hours, FED’s beige book report will be announced.
Daily Market Analysis 20.10.2022
UK inflation Boosted, EU inflation still on the increase, BoJ ready for intervention.
Yesterday, the fresh European Union(EU) inflation report re-evoke the market that global inflation continues to rise. EU inflation for the second estimation revised to %9.90 so close to two digit numbers. Also, core inflation in EU was confirmed %4.8. Therefore, risk off sentiment and rising US treasury yields support the DXY is trading above 112.80 level. US10-year bond is hovering around %4.16. The spread between US2-10year is still around 43bps.
Yesterday, FED’s Beige Book showed that economic activity has slowed and inflation pressures have somewhat eased. Also, UK inflation was released. It came stronger than expected. The headline reached to %10.1 YoY (previously %9.9). The core inflation boosted to %6.5 YoY vs %6.3 previously. In the UK, whispers come related to Liz’s resignation. There is a growing call for her resignation in the country. Thus, the pound dropped to 1.1200 level with the political uncertainties. In addition, gilts remained firm with 30-year gilt below at %4.00
In addition, Chicago Fed President Charles Evans said yesterday, “inflation is just much too high, and so we need to continue on the path that we’ve been indicating — at least that. And I’m hopeful that that will be enough.”
In this morning, Germany producer Price Index released. The data is still on the increase with %45.8 YoY. For the rest of the day, US Initial Jobless Claims and US Existing Home Sales Change will be announced.
Daily Market Analysis 21.10.2022
UK inflation Boosted, EU inflation still on the increase, BoJ ready for intervention.
Yesterday, the fresh European Union(EU) inflation report re-evoke the market that global inflation continues to rise. EU inflation for the second estimation revised to %9.90 so close to two digit numbers. Also, core inflation in EU was confirmed %4.8. Therefore, risk off sentiment and rising US treasury yields support the DXY is trading above 112.80 level. US10-year bond is hovering around %4.16. The spread between US2-10year is still around 43bps.
Yesterday, FED’s Beige Book showed that economic activity has slowed and inflation pressures have somewhat eased. Also, UK inflation was released. It came stronger than expected. The headline reached to %10.1 YoY (previously %9.9). The core inflation boosted to %6.5 YoY vs %6.3 previously. In the UK, whispers come related to Liz’s resignation. There is a growing call for her resignation in the country. Thus, the pound dropped to 1.1200 level with the political uncertainties. In addition, gilts remained firm with 30-year gilt below at %4.00
In addition, Chicago Fed President Charles Evans said yesterday, “inflation is just much too high, and so we need to continue on the path that we’ve been indicating — at least that. And I’m hopeful that that will be enough.”
In this morning, Germany producer Price Index was released. The data is still on the increase with %45.8 YoY. For the rest of the day, US Initial Jobless Claims and US Existing Home Sales Change will be announced.
Daily Market Analysis 24.10.2022
The market mood is mixed. In UK, the leader will be elected this week. Xi Jinping was elected for a record third time five-year term.
The markets turned risk on mood closing of last week due to speculation that FED might slow tightening from December. After the news, FED futures are pricing a 75bps rate hike for November FOMC meeting with %91 probability on CME Fedwatch Tool. Yet, for December meeting it is priced for 50bps with %52 chance.
In Asian session, the news that former Boris Johnson withdrew from part leadership contest led to the pound make strong. In other words, Rishi Sunak is very close to UK’s next PM. If he is elected, the markets may see relief rally for the pound. Furthermore, Xi Jinping re-elected as general secretary of Communist Party of China for a record third time five-year term. Thus, the Chinese markets face an intense sell-off because the economists expect economic slowdown since the leader prefers ideology-driven policies.
Lastly, the Dollar index remain firm on mixed market sentiment. In addition, US 2-year treasury bond is retracing %4.42 and US10-year treasury bond is trading closely %4.15. On the data front, the PMIs for October comes today.