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Inflation

This week’s two best trading opportunities? First opportunity AUD/USD Australian inflation data released Tuesday evening, might make the AUD/USD the most interesting pair to watch this week. This is because inflation will likely come in higher than 4.0% still. Less than 24 hours later, we then have the US Federal Reserve’s interest rate decision on Wednesday, which will be one of the most watched forex events of the month. The AUD/USD has stayed within a narrow range recently, forming an ascending channel that looks like a bearish flag pattern. For stability, it might want to hold above 0.6600. If it fails, the pair could possibly retest the 2024 low at 0.6524, in line with the 100-day SMA. Second opportunity: EUR/USD Why is the EUR/USD a pair to watch this week? It all comes down to the disagreement circulating in the market about where EU inflation is going to fall this week on Thursday. Some market participants forecast it is falling to 2.2% from the current 2.9%, while others are pegging it to actually increase to 3.1%. These differing opinions open up a few different targets on the charts. The near-term picture is possibly bearish with the EUR/USD developing below all its moving averages and posting a third consecutive lower low and lower high. Although the selling pressure momentum might be waning.
by BlackBull_Markets
AUD/USD eyes retail salesThe Australian dollar is in positive territory on Monday after an uneventful week. In the European session, AUD/USD is trading at 0.6603, up o.41%. The markets are braced for a soft retail sales report on Tuesday, with December's consensus estimate standing at -1.0%. The November report sparkled with a 2% gain, the strongest level since November 2021. The strong gain was driven by Black Friday sales and other discounts and likely came at the expense of the December reading with consumers doing their Christmas shopping early. There could be a surprise to the upside in the retail sales report if consumers took advantage of Boxing Day sales in late December. The Reserve Bank of Australia meets next on February 6 and has repeatedly said that upcoming rate decisions will be data-dependent. This makes Wednesday's quarterly inflation report a critical release that will have a significant impact on the central bank's rate path. In the US, inflation continues to ease while economic growth remains solid, which is the recipe that the Fed hopes will continue. The US economy expanded by 3.3% in the fourth quarter, blowing past the consensus estimate of 2.0%. On Friday, the Fed's preferred inflation gauge, the PCE Price Index, rose 0.2% m/m in December, compared to 0.1% in November. On an annual basis, the index remained steady at 2.6%. The Core PCE Index eased to 2.9%, down from 3.2% in November.  The Fed is in no rush to raise rates, and market fever over a March cut have fallen dramatically. The markets have slashed the odds of a quarter-point cut in March to 48%, down sharply from 72% a month ago, according to CME's FedWatch tool. AUD/USD is testing resistance at 0.6583. There is weak resistance at 0.6613 There is support at 0.6544 and 0.6514
by OANDA
U.S Core PCE Price Index (MoM)ECONOMICS:USCPCEPIMM Core PCE prices in the US, which exclude food and energy, rose by 0.2% from the previous month in December of 2023, aligned with market estimates, and picking up slightly from the 0.1% increase in November. From the previous year, Core PCE prices edged 2.9% higher, undershooting market estimates of 3% to mark the lowest reading since February 2021. The data extended the disinflation trend in prices measured by the Federal Reserve’s preferred gauge, consistent with previous signals of rate cuts to be delivered this year. Regarding the whole national PCE that includes energy and food, prices rose by 0.2% from the prior month and 2.6% from the prior year, consistent with expectations. Prices for goods rose by less than 0.1% from 2022, while those for services remained elevated at 3.9%. source: U.S. Bureau of Economic Analysis
ECONOMICS:USCPCEPIMM
by Mr_J__fx
Crude oil back about $96 a barrel With the slowing of oil production and conflict at the Nile, I think that oil prices are going to increase, if the fed decides to cut or leave interest rates unchanged this may weaken the USD and strengthen other currencies creating more demand for oil and if inventory continues to lessen you will see a further surge in oil prices. otherwise, if the fed raises interest rates next week and productions issues come to resolve oil prices will begin to drop and I will update this post with a bearish Analysis.
NYMEX:CL1!Long
by jewlstagara
U.S. Core PCE Comes in Lower than Expected U.S Core PCE (FEDS FAVOURITE METRIC) Rep: 2.9% ✅ Lower Than Expected ✅ Exp: 3.0% Prev: 3.2% U.S. Headline PCE Rep: 2.6% ✅ In Line with Expectations ✅ Exp: 2.6% Prev: 2.6% Historical Core PCE Norms On the chart you can see that since 1990 the typical Core PCE range is between 1 - 3% (red dotted lines on chart). We are slowly getting back down into this more historically moderate level. We have just fallen below the 3% level and down into the historically moderate zone for PCE levels. The Federal Reserve have advised that Core PCE is expected to decline to 2.2% by 2025 & finally reach its 2% target in 2026. At this rate we might reach 2% a little sooner than that. For the full breakdown of the Core and Headline PCE and to know the differences between PCE and CPI, please review the Macro Monday I previously released which explains it all (in the comments below). PUKA
ECONOMICS:USCPCEPIAC
by PukaCharts
USD/JPY steady after Tokyo Core CPI falls below 2%The Japanese yen is drifting on Friday. In the European session, USD/JPY is trading at 147.80, up 0.10%. Tokyo Core CPI reached a significant milestone today, falling to 1.6% y/y in January, after a December reading of 2.1%. This was the first time the indicator dropped below the Bank of Japan's 2% target since May 2022. The main driver of the decline was lower energy prices. Tokyo Core CPI excludes fresh food but includes fuel. The Tokyo core-core index, which excludes fresh food and fuel prices, rose 3.1% y/y in January, down from 3.5% in December. The drop in inflation reinforces the BoJ's view that cost pressures are gradually being replaced by rising service prices as the main driver of inflation. This is hugely significant, as it points to inflation being more sustainable, which is a requirement for the BoJ before it tightens its ultra-loose policy. Japan also released corporate service inflation for December which held steady at 2.4%, a nine-year high. That reading underscores that service prices remain high a companies continue to pass on their costs. BoJ Governor Ueda stated at this week's policy meeting that progress is being made towards the target of 2% sustainable inflation, and that has the markets speculating that the BoJ could make a major policy shift in April or June. The BoJ wants to see higher wages as evidence that inflation is sustainable and the national wage negotiations in March are expected to provide higher wages for workers. In the US, the first-estimate GDP for the fourth quarter smashed above expectations, but the US dollar didn't show much interest. GDP growth rose 3.3% y/y, below the 4.9% gain in the third quarter but well above the consensus estimate of 2.0%. The US economy continues to produce stronger-than-expected data and that has the markets paring expectations for a rate cut in March. The probability of a March cut has fallen to 48%, down sharply from 70% one month ago, according to the CME's FedWatch tool. USD/JPY tested support earlier at 147.54. Below, there is support at 146.63 There is resistance at 148.44 and 149.35
by OANDA
USD/JPY shrugs after US GDPThe Japanese yen has edged lower on Thursday. In the North American session, USD/JPY is trading at 147.62, up 0.08%. The US economy continues to surprise with stronger-than-expected data. On Wednesday, the services and manufacturing PMIs both accelerated and beat the estimates, followed by first-estimate GDP for the fourth quarter earlier today. The economy sparkled with an expansion of 3.3% q/q, blowing past the consensus estimate of 2.0%. This follows the blowout gain of 4.9% in the third quarter. Consumer spending remained strong at 2.8%, compared to 3.1% in the third quarter. The US economy expanded in 2023 at 2.5% y/y, up from 1.9% in 2022. The US dollar's reaction to the positive GDP report has been muted. There were concerns earlier this year that the economy might tip into a recession, as the Fed continued to raise interest rates to beat down inflation. However, solid consumer spending and a resilient labour market have boosted economic growth and the Fed is well on its way to achieving the tricky task of a soft landing for the economy. On the inflation front, the core personal expenditure price index was unchanged at 2% in the fourth quarter, while the headline index rose 1.7%, down sharply from 2.6 in Q3. The week wraps up with the personal consumption expenditures (PCE) price index on Friday, considered the Fed's preferred inflation gauge. The PCE price index and core PCE price index are expected to edge slightly lower in January, which would be an encouraging sign that the inflation is moving lower. Japan releases Tokyo Core CPI, a key inflation indicator, on Friday. The consensus estimate for January stands at 1.9% y/y for January, after a 2.1% gain in December. If the estimate proves correct, it would mark the first time in almost two years that it has fallen below the BoJ's target of 2%. USD/JPY is testing resistance at 147.54, followed by resistance at 148.44 There is support at 146.63 and 145.73
by OANDA
TMV Triple Inverse Treasury Bill ETF LONGTMV on the 4H chart appears to be reversing a trend down since 12/28. YTD it is rising. The reasonable target is the Fib 0.5 retracement at $40 while support for a stop loss just below the POC line of the volume profile is $29.25. As such this is a 35% upside. The RSI indicator shows the fast RSI rising and crossing over the slower RSI while the relative volume indicator shows increasing volumes reacting to the price bottoming and accumulation underway. I see this as a long trade set up while recognizing that fundamentals such as interest rate adjustments and inflation data could impact the technicals.
AMEX:TMVLong
by AwesomeAvani
SW: Weak Wheat Prices Are Here to StayCBOT: Wheat ( CBOT:ZW1! ) In stark contrast to the rising stock market, most agricultural commodities have lost ground in 2023. In the Grain & Oilseeds market, CBOT Soybean (ZS) finished the year at $12.73 per bushel, down 14.7% year-on-year. CBOT Corn (ZC) closed at $4.63/bushel, down 30.8% YOY. CBOT Wheat (ZW) settled at $5.93/bushel, down 24.5%. In the Livestock & Meat market, CME Group Lean Hog (HE) lost 23.2%, while Pork Cutout (PRK) was down 13.0% YOY. Live Cattle (LE) was the only exception with a 10.3% gain. Despite bad weather, supply chain bottleneck, rising cost of borrowing, and escalating geopolitical conflicts in Europe and the Mideast, farmers around the world managed to produce higher outputs of grain and meat. With food demand remaining weak, this surplus supply pushed the prices of food ingredients downward. The WASDE Report Today, we will focus on wheat, which saw huge price volatility in the past five years. According to the latest World Agricultural Supply and Demand Estimates (WASDE) report, published by the United States Department of Agriculture (USDA) last week: • Global wheat output for 2022/23 was 789.17 million metric tons, up 1.2% YOY; • Output for 2023/24 was estimated at 783.01 in December but revised up to 784.91; • Global supplies are raised by 3.6 million tons to 1,056.5 million on higher beginning stocks and production. In the US, average yield per harvested acre was 46.5 bushels in 2022/23, up 5.0% YOY. • The WASDE estimated yield to grow 4.5% more to 48.6 bushels in 2023/24; • Across all wheat varieties, total US production was estimated at 1,646 million metric tons in 2021/22, 1,650 in 2022/23 (+0.2%) and 1,812 in 2023/24 (+9.8%); • The 2023/24 season-average farm price is forecasted by $0.10 per bushel lower at $7.20, based on prices received to date and expectations for the remainder of 2023/24. Quick Review of My Previous Trade Idea on Wheat Futures A rule of thumb for agricultural commodities: Their market prices are very sensitive to supply changes. Due to weather perils, deceases, shipping route blockage, among others, significant uncertainties surround food availability in terms of quantity and quality. On the other hand, demands for agricultural commodities are relatively stable, and have a smaller effect on price changes. In February 2022, the breakout of Russia/Ukraine conflict sent wheat prices up 70% within two weeks, from $7 to $12 a bushel. The two countries accounted for about 28% of the global wheat export market. Investors panicked that geopolitical conflicts could cut off the wheat supply. It turned out that the fear was overblown. Despite the ongoing conflict, Russia and Ukraine agreed to keep the Black Sea grain shipping routes open. By July 2022, wheat prices were back to $7.50 a bushel, down 60%. On June 2022, I published a trade idea on Long Strangle options strategy on Wheat Futures. Below is a follow-up report on how that wheat options trade performed: Trading with CBOT Wheat Futures The World Bank forecasts the global economic growth to slow for the third year in a row — from 2.6% in 2023 to 2.4% in 2024, which is almost three-quarters of a percentage point below the GDP growth average of the 2010s. Slowing economy points to a weak demand for wheat this year. Consequently, the expected wheat supply increase would put further pressure on wheat prices. Another supporting evidence: I observe that in the past five years, wheat price trend closely tracks that of the US CPI for food (see title chart). Food CPI peaked in August 2022 at 11.4%, but it is sharply down to 2.7% in December 2023. During the period of runaway inflation, food prices were a major contributor to inflation, which drove headline CPI and core CPI higher. Now, food inflation is below both. The January 16th CFTC Commitments of Traders report (COT) shows that “Managed Money” holds 73,485 long positions and 142,060 short positions on wheat futures. The long/short ratio of 1:2 indicates that speculative traders are bearish on wheat prices. Last Friday, the March wheat contract (ZWH4) was settled at $5.93 per bushel. In my opinion, wheat prices could fall further to test $5 a bushel, a level not seen since 2020. Each wheat contract has a notional value of 5,000 bushels, or $29,662 at current price. To acquire 1 contract, a trader is required to deposit an initial margin of $2,500. Hypothetically, if futures price falls by 50 cents a bushel, a short futures position would gain $2,500 (= 0.50 x 5000). Using the $2,500 initial margin as cost base, a short trader could realize a theoretical return of 100%, excluding commission. If crop yield is to grow less than expected, or if wheat demand increases more than expected, wheat futures could rise, and a short position will stand to lose money. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
CBOT:ZW1!Short
by JimHuangChicago
GBP/USD dips as retail sales slideThe British pound has weakened slightly on Friday. In the European session, GBP/USD is trading at 1.2682, down 0.18%. The markets were expecting a letdown from December retail sales after a strong November reading, but nobody was expecting a multi-year drop. Yet that's what happened, as retail sales plunged 3.2% m/m, the lowest level since January 2021. Considering the sharp drop, the British pound's reaction has been muted. In November, retail sales jumped a revised 1.4%, as shoppers flocked to department stores to take advantage of Black Friday sales and other discounts. This meant that much of the Christmas shopping took place in November. The massive drop of 3.2% crushed the consensus estimate of -0.5%. There is more to this story than Black Friday sales. The weak December reading reflected a UK consumer who is pessimistic about the economy and is being relentlessly squeezed by high inflation and elevated borrowing costs. December retail sales were brutal but the struggles faced by consumers are nothing new - retail sales fell by 2.8% in 2023, the lowest level since 2018. The sharp drop in retail sales will have a negative impact on December GDP, which could mean that GDP for the fourth quarter is negative. If that is the case, the UK will technically be in a recession, with two consecutive quarters of negative growth. Even if the UK manages to avoid a recession, growth will be flat. The Bank of England has kept rates unchanged for three straight times and meets on February 1. The sharp drop in retail sales supports the BoE considering a rate cut, but December inflation rose unexpectedly from 3.9% to 4.0%, and the BoE will be hesitant to chop rates before inflation is closer to the 2% target. GBP/USD is testing support at 1.2689. Next, there is support at 1.2625 There is resistance at 1.2738 and 1.2802
by OANDA
GBP/USD eyes UK retail salesThe British pound has edged lower on Thursday. In the European session, GBP/USD is trading at 1.2655, down 0.20%. What goes up must come down. That has the markets fretting ahead of the UK retail sales report on Friday. Retail sales growth was brisk in November, with an impressive gain of 1.3% m/m. This followed zero growth in October and marked the strongest gain since April 2022. The problem with the strong November release was that consumers were enticed to spend big due to Black Friday sales in late November. This is expected to dampen December retail sales, with many shoppers taking advantage of the discounted prices and attending to their Christmas shopping a few weeks early. The market estimate for December retail sales stands at -0.5%. The Bank of England will be keeping a close look at the retail sales report, as it digests this week's inflation data with an eye to the next policy meeting on February 1. Inflation in December rose unexpectedly, climbing from 3.9% to 4.0%. The BoE has tried to dampen market expectations of up to six rate cuts this year, with Governor Bailey sticking to a script of "higher for longer". The BoE won't be entertaining rate cuts until it is convinced that inflation is closer to the 2% target and key economic releases point to an improving economy. The unexpected rise in inflation did not support talk of a rate cut, and all eyes are now on Friday's retail sales report. GBP/USD tested support at 1.2656 earlier. Next, there is support at 1.2616 There is resistance at 1.2715 and 1.2755
by OANDA
Gold price bounces off, downside remains bets easeHere is what you need to know on Thursday, January 18: Technical Analysis: Gold price finds a temporary support near $2,000 Gold price attempts a firm-footing near psychological support at $2,000 amid a nominal decline in the US Dollar Index. The near-term demand for the precious metal has turned bearish as it has slipped below the 50-period Exponential Moving Average (EMA), which trades around $2,017. The higher-high-higher-low formation in the Gold price is over and market participants could utilize pullbacks for building fresh shorts. The 14-period Relative Strength Index (RSI) has dropped to near 40.00. If the RSI fails to sustain above 40.00 levels, a bearish momentum will get triggered. •Gold price discovers bets near $2,000 but remains on backfoot amid easing Fed rate cut hopes. •Stubborn US inflation and robust Retail Sales data favour a maintenance of hawkish interest rate stance. •Market participants will focus on Fed Bostic’s commentary ahead. Gold price (XAU/USD) has executed a short-term recovery move in the midst of a persistent downtrend. Gold price printed a fresh monthly low near the psychological support of $2,000 on Wednesday, then bounced. Yet despite the rebound, the precious metal remains on the backfoot as investors continue to worry about when the Federal Reserve (Fed) will start its long awaited rate-cut cycle. The hopes of an early rate-cut decision from the Fed are easing as the last leg of inflationary pressures in the United States is turning out significantly more stubborn than previously thought, due to robust consumer spending and steady labor market conditions. Amid an absence of front-line economic indicators, market participants are expected to shift focus towards the first monetary policy meeting of the Fed, which is scheduled for January 31. The Fed is widely anticipated to keep interest rates unchanged in the range of 5.25-5.50%. Investors will keenly focus on how the Fed proposes to make three rate cuts of 25 basis points (bps) each in 2024, as projected in the December monetary policy meeting. Daily Digest Market Movers: Gold price finds an interim support as US Dollar corrects •Gold price discovers an intermediate support near the psychological $2,000 level after an intense sell-off. •The near-term demand is still downbeat as uncertainty about an interest rate cut from the Federal Reserve in March has deepened. •Trades have pared bets supporting a rate cut in March due to resilience in the US economy. •Bets supporting an interest rate cut of 25-basis points (bps) have increased slightly to 61% but are still below the 75% recorded last week, as per the CME Fedwatch tool. •Market expectations for early cuts from the Fed have been pushed back as price pressures in the US economy remained stubborn and consumer spending grew strongly in December. •Upbeat economic indicators have provided room to Fed policymakers to maintain a restrictive monetary policy stance for a longer period than that anticipated by market participants before their release. •This week, Fed Governor Christopher Waller said the central bank should not rush taking interest rates down as more evidence is needed to ensure that price pressures are returning to 2% in a sustainable manner. •Christopher Waller advised that the Fed should reduce interest rates “carefully and methodically”, considering resilience in the US economy. •Meanwhile, the US Dollar Index (DXY) has rebounded after a gradual correction to near 103.20, supported by risk-off market sentiment. 10-year US Treasury yields are maintaining a firm-footing above 4%. •Later the day, investors will focus on the weekly jobless claims for the week ending December 12 and commentary from Federal Reserve of Atlanta Bank President Raphael Bostic. •Bostic is expected to maintain a hawkish argument considering stubbornly higher price pressures. •On Monday, Fed’s Bostic commented that progress in inflation declining towards 2% could slow if policymakers cut interest rates soon.
OANDA:XAUUSDShort
by sniper_2022
1
GBP/USD eyes UK wage growthThe British pound has started the week with slight losses. In the European session, GBP/USD is trading at 1.2725, down 0.21%. The UK will release employment data on Tuesday and the spotlight will be on wage growth. Over the past few months, wages have been falling and the Bank of England would like to see that trend continue as wages have been driving inflation. Average earnings including bonuses dropped to 7.2% in the three months to September, down from 7.7% in the previous release. The market estimate stands at 6.8% for the three months to October. The UK economy is in trouble, although there was some good news on Friday, as November GDP rebounded with a gain of 0.3% m/m after a 0.3% decline in October. Retail sales drove the gain as shoppers took advantage of Black Friday sales late in November. Still, the probability of a recession, which is defined as two consecutive quarters of negative growth, remains high. The economy declined by 0.1% in the third quarter and a fourth quarter of negative growth would mean that the economy is technically in a recession. Even if a recession is avoided, the economy has flatlined and isn't showing any growth. The lack of economic growth puts the Bank of England in a dilemma. The central bank has sharply raised interest rates in order to curb high inflation and significant progress has been made. A year ago, inflation was in double digits, galloping at a 10.1% clip. Inflation has fallen to 3.9%, which is still double the 2% target. Governor Bailey has pushed back against rate cuts and insisted that the BoE would maintain a 'higher for lower' rate path, but lowering rates would increase economic activity and lessen the likelihood of a recession. The BoE has maintained the cash rate at 5.25% three straight times and meets next on February 1. GBP/USD is testing support at 1.2721. Below, there is support at 1.2687 There is resistance at 1.2753 and 1.2787
by OANDA
Core and Headline Producer Price Index (PPI) Release Core and Headline PPI (Dec 2023 figures) U.S. Headline PPI Prev: 0.8% / Exp: 1.3% Rep: 1.0% ✅ Lower than expected ✅ U.S. Core PPI (excludes food and energy) Prev: 2.0% / Exp: 1.9% Rep: 1.8% ✅ Lower Than Expected✅ What is PPI and why is it important? Producer Price Index is a crucial economic indicator that provides valuable information about inflationary pressures at the producer level. By tracking changes in producer prices over time, it provides insights into inflation trends before they manifest in consumer prices. Difference between Core and Headline PPI The Core PPI aims to provide a more stable measure of underlying inflation, while the headline index reflects all price changes, including those driven by more volatile components such as food an energy. You can see from the chart that Headline PPI in red is the swings more widely up and down due to the inclusion of these volatile components (food and energy). ✅ LOWER THAN EXPECTED PPI TODAY✅ Core and Headline PPI came in lower than expected this month and as you can see we are reaching down into the historically more moderate zone between 3% and -1.5%. This bodes will for inflationary pressures in general and may be an early indicator of lower Core and Headline inflation figures (for CPI) in the coming months. PUKA
ECONOMICS:USCPPYY
by PukaCharts
Reacceleration of inflation presents a trouble for the FEDYesterday, the market became slightly spooked by the release of higher-than-expected inflation numbers in the United States. The immediate reaction of the SPX to the news was negative, with the index erasing its early gains; the same price action could be observed in the Nasdaq 100 and Dow Jones Industrial Average. Nevertheless, market indices recovered much of their losses by the close and have been trending sideways. The reacceleration of inflation in the United States represents a hurdle for the FED in its quest to tame inflation (likely causing it not to cut interest rates at the next meeting at the end of January 2024 or in March 2024). In addition to that, it could shatter the investors’ expectations of premature rate cuts if no significant improvement is seen in the next print. In turn, that could negatively affect the stock market down the road. In regard to technicals, the resistance at $4,800 continues to play a crucial role; if the price manages to break above it and close there (ideally for at least two consecutive days), it will be very positive. The resumption of growth in RSI, MACD, and Stochastic on the daily chart will also bolster a bullish case. However, the flattening of these indicators and a failure of the RSI to break above 70 points will be slightly concerning. Illustration 1.01 Illustration 1.01 shows the 5-minute graph of the SPX. The yellow arrow indicates the moment when inflation numbers were released in the United States. Technical analysis Daily time frame = Neutral Weekly time frame = Neutral Please feel free to express your ideas and thoughts in the comment section. DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not serve as a basis for taking any trade action by an individual investor or any other entity. Your own due diligence is highly advised before entering a trade.
SP:SPX
by Tradersweekly
8
GBP/USD yawns after strong UK GDPThe British pound is showing limited movement on Friday. In the European session, GBP/USD is trading at 1.2769, up 0.05%. The British economy grew in November by 0.3% m/m, rebounding from a 0.3% decline in October and edging above the market estimate of 0.2%. This was the sharpest GDP growth since July and was driven by stronger activity in services, retail sales and manufacturing. The news was not as good from a three-month snapshot, however. The economy contracted 0.2% in the three months to November, unchanged from the previous release and missing the market estimate of -0.1%. The December GDP release will answer the question of whether the UK economy is in a shallow recession. Third quarter GDP was revised to -0.1% and if Q4 also posts negative growth, the economy would technically be in a recession. Even if the economy manages to avoid a recession, it will likely point to stagnation. The weak UK economy presents the Bank of England with a dilemma. The BoE is under pressure to lower rates to kick-start the economy, but inflation is running at a 3.9% which is almost double the 2% target. The BoE would prefer to maintain a 'higher for longer" rate path and let restrictive rates continue to push inflation lower. The central bank is likely to keep interest rates on hold at the next meeting on February 1. In the US, inflation was higher than expected in December, with a gain of 3.4%. This was a rude surprise for the markets, which have become accustomed to inflation heading lower. The Fed won't be losing sleep over the upswing, as Core CPI, which is a better indicator of inflation trends, dipped lower to 3.9%. The rise in US inflation is a reminder that the battle to bring inflation back to the 2% target will be bumpy. The Fed has done an admirable job in lowering inflation but the final stretch is looking to be the most difficult. Services and housing inflation remains sticky and deflationary pressures from goods and energy have been fading. The markets have pared their expectations for a March rate cut to around 70% but the Fed has been pushing back against these expectations. Cleveland Fed President Mester said on Thursday after the inflation report that it was "too early" to cut rates in March because the inflation release showed that restrictive policy was needed to bring down inflation to the 2% target. GBP/USD is putting pressure on resistance at 1.2795. Above, there is resistance at 1.2826 There is support at 1.2742 and 1.2711
by OANDA
GBP/USD flat ahead of US inflation dataThe British pound is unchanged on Thursday, trading at 1.2741 in Europe. We could see some movement from the pound in the North American session following the release of the US inflation report. On Friday, the UK releases GDP, which is expected to show a 0.2% gain in November, after a 0.3% decline a month earlier. US inflation fell dramatically in 2023 and we'll get a look at the December inflation report later today. Inflation was running at a 6.5% clip a year ago and the Federal Reserve has done an admirable job in slashing the inflation rate in half. US CPI is expected to have edged up to 3.2% y/y in December, compared to 3.1% in November which marked a five-month low. Monthly, CPI is expected to have inched up to 0.2%, following a 0.1% gain in November. The Fed will be more concerned with core CPI, which is a better gauge of inflation than the headline reading. Core CPI is projected to have eased to 3.8% in December, after two straight gains of 4.0%. Monthly, Core CPI is expected to remain at 0.3%. If the inflation readings are wide of the estimates, we could see some volatility from GBP/USD. The Bank of England was in the spotlight on Wednesday, as Governor Bailey testified before a parliamentary committee regarding the country's financial stability. Bailey didn't offer any clues about monetary policy but expressed satisfaction that mortgage rates have been falling. The markets are confident that the BoE's rate-tightening cycle is over and that the central bank will start cutting interest rates in mid-2024. Bailey has stuck to a 'higher for lower' stance on rates but there is pressure on the BoE to consider rate cuts as inflation fell sharply in November to 3.9%, down from 3.6% a month earlier. Bailey may prefer to keep rates in restrictive territory until inflation falls closer to the 2% target before lowering rates. GBP/USD is testing resistance at 1.2722. Above, there is resistance at 1.2753 There is support at 1.2678 and 1.2647
by OANDA
Core and Headline CPI (Release Tomorrow Thurs 11th Jan 2024)Core and Headline CPI NEW CPI Figures released tomorrow Thursday 11th Jan 2024 @ 7:30am Central (for the December 2023 month) U.S. Headline CPI Prev: 3.1% Exp: 3.2% Rep: TBC Tomorrow U.S. Core CPI Prev: 4.0% Exp: 3.8% Rep: TBC Tomorrow Will the US Core CPI finally fall below 4% for the first time since May 2021? Core vs Headline (the difference) You can clearly see how Core CPI is less volatile than Headline CPI on the chart. Core CPI removes the volatile food and energy expenditures to provide the underlying inflation trend. Food and Energy is included in the Headline inflation which as you can see from the chart is much more volatile and changes direction quicker than core inflation. Its almost like an oscillator around the core inflation line. The Feds 2% Target It is clear that we are not at the Federal Reserve’s target inflation rate of 2% on both fronts (purple line). It is critical to understand that we are still not at or below the target 2% level regardless of the FOMC’s determination of a likely hold on interest rates and reductions to interest rates in 2024. Lets see can the target be met first. You can see that since 2002 Core CPI has fluctuated one standard deviation above and below the 2% inflation level between 1% and 3%. It is clear that we are not back into this standardised zone between 1 – 3%. I’ll update you tomorrow with the released figures PUKA
ECONOMICS:USIRYY
by PukaCharts
Australian dollar falls despite solid retail salesThe Australian dollar is in negative territory on Tuesday. In the North American session, AUD/USD is trading at 0.6685, down 0.51%. Australia's retail sales sparkled in November but the strong rebound wasn't reflected in the Australian dollar. Retail sales climbed 2.0% m/m in November, blowing past the estimate of 1.2% and recovering from a revised 0.4% decline in October. This was the highest reading since November 2021 as consumers came out and took advantage of Black Friday sales in late November. The boost in November sales could come at the expense of December sales, however, as consumers may have brought forward their Christmas shopping. Consumer confidence has improved on expectations that interest rates have peaked. Last week's ANZ consumer confidence index indicated that consumer confidence was at its highest level in a year and homeowners are also feeling optimistic as house prices have been rising. Australia will release the November inflation report on Wednesday, with expectations that inflation fell to 4.4%, down from 4.9% in October. The markets have priced in the first RBA rate cut in June but that could be brought forward if inflation falls below the estimate. The US will release the December inflation report on Wednesday as well, which could mean a volatile day for the Australian dollar. With the Federal Reserve on board for rate cuts this year, Fedspeak is being carefully monitored as investors search for hints as to the timing of a first rate cut. The markets have priced in an initial rate cut in March, but had to trim the odds after Friday's nonfarm payroll report was stronger than expected. Atlanta Fed President Bostic said on Monday that he was comfortable with a restrictive stance while inflation continues to move down toward the 2% target. AUD/USD tested resistance at 0.6732 earlier. Above, there is resistance at 0.6824 There is support at 0.6625 and 0.6533
by OANDA
$US100 Another Bulls rally ends the sell off? This Friday we met the 0.5 Fib retracement level from the last breakout. Wall street snapped on its 9 week winning streak. Mixed with both fear and hope to number of expected rate cuts in the current year of 2024, recent commodities price had shown re-incarnation followed by increasing tension in regions including Mid-east, Korea, and Ukraina. Major AI stocks that carried the market throughout 2023 had cooled off a bit during the first week of Jan. But, is this really the end? All eyes are on the US inflation data for further cues on the Federal Reserve's monetary policy outloook. Forecasts suggest consumer prices likely edged up by 0.2%. We could assume the service sector laid off number of their employees to maintain their high-productivity rate continue from last year. With this expectation, 6 rate cuts may seem naive option to blindly follow. Although, I expect market to move up for the first three days just because of the false hope of dovish fed speech planned for this Thursday.
CAPITALCOM:US100Long
by Kim_CLSPX
Top 7 inflation-induced trading opportunities this weekThis week, the focus of many traders will be on US inflation data, which will provide valuable insights into the Federal Reserve's monetary policy outlook. The forecasts indicate a potential 0.2% increase in both headline inflation for December and the core rate. On an annual basis, the headline inflation rate is anticipated to rebound to 3.2% from November's five-month low of 3.1%. Meanwhile, the core rate is likely to ease to 3.9%, the lowest since May 2021. This crucial data will be released on Thursday. In the midst of the US inflation focus, there are noteworthy inflation data releases from other countries, including Switzerland, Australia, Mexico, Brazil, China, India, and Russia. This diverse set of data presents many potential trading opportunities for USD pairs throughout the week: Monday: Switzerland Inflation Rate Tuesday: Australia Monthly CPI Indicator Tuesday: Mexico Inflation Rate Thursday: Brazil Inflation Rate (before US inflation data) Thursday: China Inflation Rate (after US inflation data) Friday: India Inflation Rate Friday: Russia Inflation Rate
by BlackBull_Markets