Olivia

Summary Today’s retail sales report for December showed consumer spending picked up speed in the final month of the year. Not all the dollars spent found their way into holiday spending categories, but a surge in control group sales means upside risk for Q4 PCE forecasts. December to remember sales event For anyone thinking that the consumer was losing momentum at the end of last year, think again. Retail sales rose 0.6% in December, handily exceeding expectations. Auto sales were expected to be a key driver, and that category was indeed up 1.1% in the month, but the strength extended beyond motor vehicle sales (chart). The biggest monthly gains, in fact, were reserved for some of the categories that comprise holiday shopping. The biggest percentage gainer was department stores where cashiers rang up 3.0% more sales in December. Clothing stores tied for second place with a 1.5% increase in December. Clothing store sales were up 4.3% over the past year which means that more than a quarter of all last year’s sales at clothing stores occurred in December, at least in dollar terms. Although a lot of holiday shopping took place in person this year, e-commerce still saw gains with… Read More »Moderation in all things – Except consumer spending

XAU/USD Current price: 2,004.64 Resilient United States data and comments from Fed officials undermine the market mood. Stocks trade in the red for a second consecutive day, yields reach fresh multi-week highs. XAU/USD bearish momentum supports a slide below the $2,000 mark in the near term. Spot gold trades at its lowest since mid-December, as the US Dollar extends its advance as global stocks fell further. The XAU/USD pair trades near an intraday low of $2,003.28 mid US-afternoon, as investors keep reducing bets on a Federal Reserve (Fed) rate cut next March. The CME FedWatch Tool shows a 52% chance of such an event, down from roughly 70% a couple of weeks ago. Mixed United States (US) data released on Wednesday further weighed on the pair. The country reported that Retail Sales were up 0.6% MoM in December, while Industrial Production in the same month increased 0.1%, both beating expectations. Capacity Utilization rose 78.6%, below the 78.7% expected. Resilient macroeconomic data combined with hawkish words from Fed officials weighing down the odds for a March cut. Government bond yields are also on the rise, with the more sensitive 2-year Treasury note currently offering 4.36%, while the 10-year note yields 4.10%,… Read More »Gold Price Forecast: XAU/USD menaces a bearish breakout of the $2,000 mark

EUR/USD Current price: 1.0874 Financial markets await US Retail Sales for the next directional movement. Risk mood is off amid market players recalculating bets on upcoming rate cuts. EUR/USD maintains the bearish bias, could accelerate its slump once below 1.0845. The EUR/USD pair extended Tuesday’s slump to 1.0855 at the beginning of the day, slowly trimming intraday losses and currently trading flat in the 1.0870 price zone. Comments from US Federal Reserve (Fed) officials made investors hesitate about rate-cut odds, sending stocks sharply down, and Treasury yields firmly up. Asian stocks edged lower, further supporting the Greenback, as softer-than-anticipated Chinese data spurred concerns. The Gross Domestic Product posted a quarterly increase of 1% in the final quarter of 2023, while the annual comparison printed at 5.2%, below the expected 5.3%, although better than the previous 4.9%. European stocks replicate their overseas counterparts, trading in the red and weighing on Wall Street futures. In the meantime, US Treasury yields maintain their positive tone, with the 10-year note currently offering 4.07% and the 2-year note yielding 4.28%. Data-wise, the Eurozone confirmed the December Harmonized Index of Consumer Prices  (HICP) at 2.9%, while the US published  MBA Mortgage Applications for the week ended… Read More »EUR/USD Forecast: Consolidating losses near a critical support level

Markets US yields yesterday started a catching up move after the rise in Germany on Monday. Contrary to last week, a poor NY Empire manufacturing survey this time was no pretext to push yields back lower. On the contrary, US yields were propelled higher by comments of Fed’s Waller as he provided a detailed analysis of the Fed’s rate strategy going forward. Waller acknowledged that the pieces are falling in place for the Fed to gradually start cutting rates this year. However, the process should be deployed ‘methodically and carefully’. In this respect, he tempered markets’ aggressive rate cut expectations. “With economic activity and labor markets in good shape and inflation coming down gradually to 2%, I see no reason to move as quickly or cut as rapidly as in the past”, he was quoted. He also indicated that it is reasonable to start thinking about slowing the pace of the balance sheet runoff. US yields extended their intra-day rise post Waller, closing between 7.5 bps (2-y) and 12 bps (30-y) higher. Spill-overs from the US also help German yields back into positive territory. In a steepening move, the 2-y yield closed little changed, but the 30-y added 3.0 bps.… Read More »US December Retail Sales are taking center stage

EUR/USD drops to over a one-month low on Wednesday amid some follow-through USD buying. Reduced bets for a March Fed rate cut act as a tailwind for the US bond yields and the Greenback. Mixed signals from ECB policymakers fail to impress the Euro bulls or lend support to the major. The EUR/USD pair remains under some selling pressure for the second straight day on Wednesday and drops to its lowest level since December 13, closer to mid-1.0800s, or the 200-day Simple Moving Average (SMA) during the early European session. The US Dollar (USD) builds on this week’s breakout momentum through a short-term trading range and jumps to over a one-month peak, which, in turn, is seen as a key factor weighing on the major. Federal Reserve (Fed) Governor Christopher Waller said on Tuesday that the US central bank will not rush to cut policy rates until it is clear that lower inflation will be sustained. The comments forced investors to further push back their expectations for a more aggressive policy easing and remain supportive of elevated US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond holds steady above the 4.0% threshold, which, along… Read More »EUR/USD Analysis: Acceptance below 61.8% Fibo. favour bears, 200-day SMA holds the key

Asia wrap The tone set by Federal Reserve Governor Christopher Waller has caused a shift in bond markets, indicating that there may not be a swift rate-cutting trajectory as previously expected. Waller, who played a role in the Fed’s dovish pivot with his remarks in November, now emphasizes a cautious approach to rate cuts, suggesting that the Fed should proceed methodically and carefully. This stance contrasts with the market’s anticipation of multiple rate cuts in 2024. Waller acknowledges that recent economic data has allowed the Fed to consider rate cuts in 2024. Still, he emphasizes the need for careful calibration, given concerns about the sustainability of these trends. The market had priced in a more aggressive rate-cutting scenario, leading to an upward shift in yields across the curve. The key takeaway from Waller’s recent comments is the emphasis on a more measured approach to rate cuts, challenging the market’s expectations of a March cut. While he believes that the policy settings are appropriately restrictive and should continue to put downward pressure on demand, he also notes that the healthy state of the economy provides flexibility. There is no urgency for immediate rate cuts. Waller’s mention of potential revisions to the Consumer… Read More »Asia wrap: A shift in the Waller doctrine and a giant question mark about China’s economy into 2024

Gold price is testing critical daily support ahead of Thursday’s US Retail Sales data. Middle East geopolitical escalation and easing Fed cut bets support the US Dollar. Gold price witnessed a symmetrical triangle fakeout, as tables turned against buyers.  Gold price is licking its wounds at around $2,025 in Wednesday’s Asian trading, having incurred heavy losses on Tuesday, courtesy of the unabated demand for the US Dollar (USD) amid a further escalation in the Middle East geopolitical tensions and easing bets for aggressive US Federal Reserve (Fed) rate cuts this year. Gold price eyes US Retail Sales for repricing of Fed expectations The US Dollar found solid demand on Tuesday, surging to its highest level in more than five weeks against its major rivals near 103.40 after risk sentiment took a big hit on reports that Iran’s Islamic Revolutionary Guard Corps (IRGC) fired missiles at targets near the US Consulate in Erbil, Iraq. Also, Iran-backed Houthi rebels struck a US-owned cargo vessel with an anti-ship ballistic missile off the coast of Yemen. Additionally, investors pared back bets for aggressive Fed rate cuts this year, following Fed Governor Christopher Waller’s less dovish speech, offering extra legs to the US Dollar comeback. Waller walked… Read More »Gold Price Forecast: XAU/USD set for more pain if the $2,021 support fails

Stocks are lower across the board on Tuesday and the key driver is the revaluation of rate cut expectations. The market has scaled back the prospects for a US rate cut in March. The CME Fedwatch tool is now pricing in a 69% chance of a cut, this had been above 75% on Monday. The increase in Treasury yields comes on the back of some hawkish commentary from the ECB, and further attacks on commercial vessels in the Red Sea. More Red Sea disruption, but will it really impact inflation? The WSJ is reporting that Shell has suspended Red Sea transits indefinitely, and overnight Qatar said that shipments of LNG would be delayed due to the unrest. The reaction in the oil markets has been fairly muted so far, the Brent crude price is up by less than 1%, and remains below $80 per barrel, and UK natural gas prices have risen only slightly after falling last week. However, the attacks are a warning sign that supply disruptions could come back to haunt the market. We mentioned last week that the Vix, the index that measures volatility in the S&P 500, was at subdued levels. The Vix has picked up… Read More »Volatility picks up as the market can’t make up its mind about rate cuts

Currencies & metals get sold in the overnight markets Credit Card delinquencies rise… Uh-oh! Good Day… And a Tom Terrific Tuesday to you! Well, congrats to the Bills and the Bucs as they joined the other 4 winners of their playoff games yesterday and last night. Man, do I miss my RedZone tv station, as i find it difficult to watch a full NFL game, and prefer to watch highlights from live games instead… The day yesterday was warm, but overcast, and allowed me to sit outside and read a good part of the day, without worrying about the sun on my skin… I’ve just started a new book for me… The Memory Man series… It’s a good one so far! Good friend, Karen brought me a ton of books to read the other day, and so now I’m set, with reading material for some time to come! The Guess Who greets me this morning with their song: Undun…  Well, it was a holiday here in the U.S. yesterday, so there wasn’t much movement in the metals, Gold did gain $6 on the day to close at $2,055… Silver ended up losing 3-cents on the day, Mondy, and ended the day… Read More »The Dollar bugs break out of the Wall

EUR/USD faces a sharp sell-off as Middle East crisis deepen. ECB policymakers pushed back market expectations of early rate cuts due to high inflation. The major will be guided by the US Retail Sales data, which will be published on Wednesday. Persistent Middle East tensions have improved the appeal for safe-haven assets while risk-perceived currencies have been hit hard in the Asian session on Tuesday. The EUR/USD pair has declined to near weekly low around 1.0900 amid dull risk-appetite as Iran-backed-Houthi rebels threatened to retaliate for airstrikes launched by the United States and the United Kingdom in Yemen. The Euro fails to gain strength despite European Central Bank (ECB) policymaker Joachim Nagel pushed back against market expectations of early rate cuts. Nagel said it is too early to discuss rate cuts as inflation is too high. ECB policymaker Robert Holzmann opposed rate cuts for the entire year, citing upside risks to energy prices due to deepening conflicts over commercial shipments from the Red Sea. Meanwhile, faltered economic development in the German economy in 2023, weighed down by inflation and global headwinds are expected to keep the Euro under stress. The German economy shrank by 0.3% in 2023 as higher interest… Read More »EUR/USD Forecast: At make or a break around 1.0900 as Middle East crisis undermine risk-appetite