Olivia

EUR/NZD achieved the 1.7400’s target from 1.8200’s while GBP/NZD completed target at 2.0200’s from 2.0900. Trade duration was 22 days and 800 pips or 1600 total. The NBER definition of Recession in found in Economic peaks and troughs. NBER views peaks and troughs as cycles identified from Indicators as real personal income less transfers (PILT), nonfarm payroll employment, real personal consumption expenditures, wholesale-retail sales adjusted for price changes, employment as measured by the household survey, and industrial production. However, declines in real PCE usually account for only a small part of the declines in real GDP. Beside PCE, NBER indicators are slow and late term and react after recession began. NBER assumes in my estimation, Economic indicators are specific to the United States. Today is different as one world economy exists. Every nation in the past 3 years suffered lower GDP and Money Supplies and higher Inflation and Interest rates. Recession is the determination of GDP and Money supplies vs Inflation and Interest rates. Either side of the equation is the exact same as GDP = Money Supplies and Inflation = Interest rates. Same as saying GDP = Interest rates and money supplies = Inflation. All apply equally to every… Read More »FX next week: Recession, NBER, trades

The Fed expectedly kept the key rate at the highest level in 22 years in the 5.25%-5.50% range but kicked off a powerful rally in equities and dollar sell-off with a dramatic change in rhetoric. Despite the tight monetary conditions, it gave key indices fuel for a rally. The Dow Jones hit an all-time high above 37200, while Nasdaq100 futures were only 0.5 percent off their peak set just over two years ago as of Thursday morning. The rally in stocks that started last Thursday added more than 5.5% to the Nasdaq100 and about 3.5% to the Dow Jones. Confirmation of the Fed’s dovish shift gave additional strength to buyers, and liquidation of short positions by bears caught off guard gave additional amplitude to the move. The reason for the rally was the change in the FOMC forecasts, according to which the committee expects three rate cuts from current levels next year, although it had previously forecast one more rate hike this year and two cuts in 2024. That’s precisely what the markets, on average, were expecting several weeks ago. However, encouraged by the reversal in rhetoric, futures are now pricing up for five rate cuts over the next year.… Read More »Have markets reached a peak? Probably not yet

Gold price is consolidating weekly gains above $2,030 early Friday. US Dollar licks its wounds alongside the US Treasury bond yields after the dovish Fed pivot.    Gold price remains exposed to upside risks amid favorable technicals.   Gold price is fluctuating between gains and losses while trading in a tight band above the $1,930 level early Friday, as buyers pause to digest this week’s positive developments heading toward the pre-Christmas lull next week. Gold price set for weekly gain on Fed pivot Even so, Gold price is on track to book a weekly advance, snapping the previous week’s sharp pullback from all-time highs of $2,144. The Asian side trend in the Gold price can be attributed to a pause in the US Dollar sell-off, as the US Treasury bond yields attempt a tepid bounce. The US Dollar also finds a floor, as the Asian stocks pare early gains, gearing up for the release of the preliminary PMI data from the US and the Eurozone, which will throw fresh insights into the state of the global economy. The US Dollar is licking its wounds, inflicted by the US Federal Reserve’s (Fed) dovish pivot, with Chair Jerome Powell affirming 2024 interest rate… Read More »Gold Price Forecast: XAU/USD’s path of least resistance appears to the upside

Stocks finally edged higher into the close Thursday after a shaky session that followed substantial gains in the previous trading day. Surprisingly impressive, although a temperature check is bound to occur with so many folks thinking the market has gotten too far over its skis on the pace of rate cuts. That said, with $ 6 trillion of dry powder sitting in money market funds that might be champing at the bit to take the plunge into stocks, it should, at minimum, keep short sellers wary. All three major U.S. indexes made advances, putting them on course for weekly gains. The Dow, in particular, closed at a record high for the second time this year. Benchmark bond yields, influenced by the Federal Reserve’s indication of potential interest-rate cuts in 2024, reached multi-month lows. Investors have been increasingly anticipating a pivot by the Federal Reserve towards lowering interest rates in the coming year, and the central bank supported this view on Thursday by forecasting three “Insurance “rate cuts in 2024. The subsequent strong bond rally has had a ripple effect on other assets, and even the beleaguered oil market has punched higher as the dollar turned precipitously weaker on stronger pushback… Read More »Time for a temperature check in the markets

AUD/USD Current Price: 0.6706 The Australian employment report surpassed expectations. Despite upbeat US data, the US Dollar remains under pressure. The AUD/USD maintains strong bullish momentum, trading at four-month highs. The AUD/USD is maintaining a strong position at four-month highs, although it has not been able to hold above 0.6700 firmly. The pair continues to rally, supported by broad-based weakness in the US Dollar, as well as positive Australian economic data providing some additional boost. Labor market data from Australia exceeded expectations in November. Employment increased by 61,500, surpassing the expected figure of 11,000. This marks the second consecutive month of robust employment data. The unemployment rate rose from 3.8% to 3.9% due to a rise in the participation rate, which reached a record high.  The Australian Dollar (AUD) received a modest boost after the release of the labor market data. The weakness of the US Dollar drove most of the rally during the Asian session. AUD/NZD climbed to two-week highs above 1.0800, also driven by weaker-than-expected New Zealand Q3 GDP data. The primary driver for AUD/USD remains the decline of the US Dollar following the FOMC December meeting, which is viewed as a turning point for the central bank.… Read More »AUD/USD Forecast: Supported by a weaker Dollar, more gains likely above 0.6720

The Bank of England and the European Central Bank both left rates on hold on Thursday but unlike following the announcement of their counterparts in the US, there were no fireworks. Of course, it’s worth noting that the press conference is yet to happen so fireworks may fly when President Lagarde speaks but the announcement and statements that followed it didn’t give investors much to get excited about. The one point of note was the reference to inflation projections being lower than in September “especially for 2024” which may be a precursor to Lagarde insinuating then the next move could be lower in the new year. How early may determine whether markets are forced to pare back very aggressive positioning. The Bank of England announcement was arguably more notable despite offering no forecasts and there being no press conference after. The voting was unchanged from the last meeting, with three policymakers backing a rate hike, very much running counter to the message from the Fed last night. Perhaps armed with new projections in February the message from the BoE will be very different but at this moment, that was rather more hawkish than many will have expected. And the statement… Read More »A hawkish BoE followed by an uneventful ECB announcement

XAU/USD Current price: 2,039.17 The US Dollar remains pressured by Fed-inspired optimism. The Bank of England and the European Central Bank stayed pat on rates, as expected. XAU/USD is overbought in the near term but could still reach higher highs. Gold prices maintain the positive momentum, with XAU/USD trading at around $2,040, not far from an intraday high of $2,047.90. The bright metal benefited from the broad US Dollar’s weakness, resulting from the Federal Reserve (Fed) monetary policy announcement. The central bank anticipated three rate cuts in its Summary of Economic Projections (SEP) vs two in the previous dot plot. Furthermore, Chair Jerome Powell said that rate cuts appeared on the discussion table, although pledged to keep rates higher for longer as usual. But optimism did not come exclusively from the Fed. The Bank of England (BoE) and the European Central Bank (ECB) announced their respective monetary policy decisions on Thursday and also decided to remain pat for a third consecutive meeting. Without explicitly stating so, central bankers have ended monetary tightening. Speculative interest has started betting on pivots and rate cuts, and the latest announcements back such beliefs for 2024. The emergent optimism weighed on the US Dollar despite… Read More »Gold Price Forecast: XAU/USD with room to extend gains beyond $2,050

Notes/observations – Risk appetite was on following the great monetary pivot, further dovish international central bank commentary in session. – EU and US bond yields collapse after Fed decision. Multiple global indices at or approaching all-time highs with Dow Jones Industrial Average closing at record level yesterday. – ECB and BOE rate decisions in focus, with market pricing for 2024 rate cuts increasing after Fed commentary and dot plot projections. Analysts watching for ECB and BoE members pushing back against expectations. Both are expected to leave policy unchanged. – Earlier, NOK (krone) currency stronger after Norges Bank surprised with 25bps hike (consensus was unchanged). Swiss National Bank left policy unchanged and affirmed ready to be active in FX markets as necessary. – Asia closed mixed with ASX200 out-performing at +1.7%. EU indices are +0.3-1.9%. US futures are +0.2-0.3%. Gold +0.3%, DXY -0.3%; Commodity: Brent +1.9%, WTI +1.8%, TTF -2.0%; Crypto: BTC +4.1%, ETH +5.0%. Asia – Australia Nov Employment Change: +61.5K v +11.5Ke; Unemployment Rate: 3.9% v 3.8%e. – Australia Dec Consumer Inflation Expectations: 4.5% v 4.9% prior. – New Zealand Q3 GDP Q/Q: -0.3% v +0.2%e; Y/Y: -0.6% v 0.5%e. – Japan Oct Core Machine Orders M/M: +0.7% v… Read More »Rally from surprise dovish Fed pivot reverberates through global markets

GBP/USD went into a consolidation phase above 1.2600 early Thursday. Fed Chairman Powell’s dovish remarks triggered a USD selloff late Wednesday. BoE policy statement and vote split on rate decision could drive Pound Sterling’s valuation. GBP/USD gathered bullish momentum and advanced to a 10-day-high above 1.2600 on Thursday. The pair’s near-term technical outlook points to a bullish tilt but the Bank of England’s policy announcements could drive the action later in the day. The Federal Reserve (Fed) left the interest rate unchanged at 5.25%-5.5% following the December policy meeting as anticipated. The revised dot plot, formally knows as the Summary of Economic Projections, pointed to a total of 75 basis points rate reduction in 2024. In the post-meeting press conference, Fed Chairman Jerome Powell said that they don’t want to make the mistake of keeping rates too high for too long. Powell also noted that there was a general expectation among policymakers that rate cuts will be a topic of conversation moving forward. Powell’s dovish tone triggered a rally in Wall Street’s main indexes, causing the US Dollar (USD) Index and US Treasury bond yields to decline sharply.

Markets are pricing three rate cuts in 2024 and we doubt the Bank will be too happy about that. Expect policymakers to reiterate that rates need to stay restrictive for some time. But with services inflation coming down and wage growth set to follow suit, we think investors are right to be thinking about a summer rate cut. We expect 100bp of cuts next year. Markets are ramping up rate cut bets, and Governor Bailey isn’t happy about it Financial markets are rapidly throwing in the towel on the “higher for longer” narrative that central banks have been pushing hard upon for months. Even more remarkably, a small but growing number of policymakers from the Federal Reserve to the European Central Bank seem to be getting second thoughts too. So far, that market repricing has been less aggressive for the Bank of England. Investors are expecting three rate cuts next year compared to more than five over at the ECB. The first move is seen in June, as opposed to March over in Frankfurt. Despite that more modest adjustment, the Bank of England is starting to sound the alarm. Governor Andrew Bailey said in recent days that he is pushing back… Read More »Bank of England to push back against rising tide of rate cut expectations