Olivia

We're seeing choppy trade in financial markets on Wednesday in what is always quite thin trade as traders continue the festivities into the new year. And there's certainly a strong sense of holiday trade to the markets today, with light news flow combined with lower liquidity creating choppy but ultimately insignificant moves. It very much feels like we're now just drifting into 2023 at which point I expect things will quickly pick up again. The key trading themes will continue to dominate in early January, most notably how far central banks are willing to push interest rates in order to display their determination to get inflation back to target. Many have already started easing off the brake and we're seeing plenty of signs of pressures easing, albeit perhaps not as much as policymakers would have liked by now. Still, the risks now appear very much tilted to the downside as far as hikes are concerned against the backdrop of a very aggressive tightening in a short period of time and with many countries facing recession. Having started too late, central banks are now at risk of tightening too much and therefore overcompensating for a sloppy start with a painful exit.… Read More »An eye on the new year

Yesterday, Russia finally responded to the EU’s price cap on its oil exports, saying that they will simply stop exporting their oil to parties that ‘directly or indirectly use the mechanism of setting a price cap’. The latter announcement gave a minor boost to crude oil yesterday, but the barrel of American crude remained offered into the 50-DMA, near $81.60pb, and the price is back below the $80pb this morning. BUT, an eventual decrease in Russian oil supply gives support to the oil bulls’ in the medium run, along with other factors as China reopening and cold winter in America. Important to note: If the Chinese reopening story is positive for oil and commodity prices – and for the massively battered Chinese stocks, it’s bad news for global inflation. This is why we don’t see the US stocks gain on China reopening news, but we rather see them under a decent pressure, as the surge in Chinese demand will certainly boost inflation through higher energy and commodity prices. And in response to higher inflation, the central banks will continue hiking rates. As a result, the sovereign bond yields are higher, the stocks are lower, while the US dollar is mixed.… Read More »Bad news for global inflation? [Video]

AUD/USD Current Price: 0.6745 The poor performance of global equities limited the bullish potential of AUD/USD. Raising government bond yields reflects renewed inflation-related concerns. AUD/USD is at risk of losing the 0.6700 level in the upcoming sessions. The AUD/USD pair posted gains for a third consecutive day, hitting on Wednesday an intraday high of 0.6800 but settling in the 0.6740 price zone. The pair advanced throughout the first half of the day despite the poor performance of Asian and European equities, retreating during US trading hours as Wall Street followed the lead of their overseas counterparts. The focus stayed on government bond yields and renewed concerns about potentially higher inflation. The Australian 10-year bond yield increased by more than 20 bps, while the US one held around the multi-week high posted on Tuesday. AUDUSD short-term technical outlook The daily chart for AUD/USD pair shows that it trades around a flat 20 SMA despite being unable to clear the dynamic resistance area. The 200 SMA heads firmly lower, far above the current level, while the 100 SMA stands directionless at around 0.6650, providing support. Technical indicators, in the meantime, have turned flat around their midlines, reflecting the absence of directional strength.… Read More »AUD/USD Forecast: Buyers fight back, but bears remain in control

EUR/USD Current Price: 1.0648 Financial markets returned after the long weekend with optimism. US macroeconomic data failed to impress, giving the US Dollar a short-lived boost. EUR/USD quickly bounced from an intraday low of 1.0611, indicating that bulls are in control. The EUR/USD pair started the day with a bullish gap, advancing up to 1.0669, a one-week high, ending the day not far below the latter. It filled the gap after Wall Street’s opening, as poor US data temporarily boosted the greenback. Nevertheless, optimism prevailed. Financial markets were in risk-on mode amid news coming from China at the beginning of the day. The country upwardly revised its Gross Domestic Product (GDP) estimate for 2021, up to 8.4% from 8.1%. Additionally, the government continues to ease covid-related restrictions, which will mitigate the negative impact limitations had on the economy. Finally, the China Immigration Administration announced it would resume issuing visas for mainland citizens travelling abroad. The EU did not publish macroeconomic figures, but the US released the November Trade Balance, which posted a deficit of $83.3 billion, improving from the previous deficit of $98.8 billion. Wholesale Inventories for the same month were up 1%, worse than the 0.7% expected, while the… Read More »EUR/USD Forecast: Bulls keep defending the 1.0600 mark

MARKETS Stocks are lower on Tuesday as US markets reopen after Christmas. At the same time, concerns over the well-entrenched 2022 wall of worry list, including Fed policy endgame, inflation, growth, and the prospect of a recession in 2023, dominate investors' psyches during the final trading days of the year. Investors hoping for a year-end rally are likely disappointed as holiday cheer seems in short supply. Traditionally, the last week of the year is one of the lightest regarding scheduled information.  Almost everyone is becoming one with their couch, and liquidity is in short supply. But, like so much of the post-pandemic normal, this week is shaping up to be anything but dull. While the scheduled data docket remains empty, unscheduled headlines from China, TSLA weighed on US equities Tuesday, with investors assuming a more defensive stance.  Yields on 10-year Treasuries rose to 3.85%, and 'growth' sectors like Tech, Communication Services, and Consumer Discretionary are getting dented. While some of what we are seeing could result from seasonally low liquidity, there are a few things to consider if you plan on making it to your screens. TSLA is the worst-performing stock in the S&P 500 on Tuesday as new reports… Read More »Reopening Rekindles Inflationary Spirits

AUD/USD Current Price: 0.6743 Broad US Dollar weakness and firmer gold prices supported AUD/USD. Easing US inflation and China’s focus shift to growth boosted the market mood. The risk of an AUD/USD bearish breakout decreased in the near term. The Australian Dollar advanced against its American rival on Tuesday, with AUD/USD peaking at 0.6775, to later settle in the 0.6740 price zone. The pair was all about US Dollar weakness, and optimism, given that the Australian macroeconomic calendar had nothing to offer and will remain empty throughout the week. Higher gold prices also supported the Aussie, as the bright metal peaked at a fresh three-week high, retaining gains despite easing from such a high. The better market mood was triggered last Friday by further signs inflation in the US eased, as the annual core PCE Price Index printed at 5.5% YoY in November, down from 6.1% in the previous month. The upbeat sentiment was reinforced on Monday by news that China will ease further covid-related restrictions, fueling speculation the local government would now focus on boosting economic growth. AUDUSD short-term technical outlook The daily chart for AUD/USD pair shows that it left an unfilled gap at the opening at 0.6657… Read More »AUD/USD Forecast: Bulls recapture 0.6700, but more gains at doubt

Notes/observations – Risk appetite trying to end the year on a positive note. – China planning to drop quarantine requirements for inbound travelers. Asia – China to remove all covid-related quarantine regulations and lift restrictions on international flights from Jan 8th, 2023; Govt downgrades Covid-19 from category A to a category B disease. – Japan PM Kishida announced restrictions for arrivals from China. – Japan Nov Jobless Rate: 2.5% v 2.5%e. – Japan Nov Retail Sales M/M: -1.1% v +0.2%e; Y/Y: 2.6% v 3.9%e. – Japan govt sells 2-year JGB with positive yield (1st time since 2015). – BOJ Gov Kuroda reiterated stance that recent policy change was not tightening. – Japan PM Kishida stated that would watch economic situation to decide on next BOJ Governor; Premature to talk about reviewing BOJ-Japan govt accord; Reiterates govt stance that recent BOJ move on YCC tolerance band was not exit from easing, but way to make easing sustainable. – North Korea drone briefly flew over South Korea’s capital Seoul city; In total, five North Korean drones crossed the border (1st time since 2017). Ukraine conflict – Russia Pres Putin: We are ready to negotiate some acceptable outcomes on Ukraine with all parties… Read More »Risk appetite percolates as China’s announces COVID-19 shift

Rarely has the energy market been such an important driver of global economic conditions. In this full report, we look at what to expect from oil and gas. We learn that European utilities are resilient but are far from immune to crises. And we look at the growth in renewables and how that is going to develop in 2023. Executive summary Oil, gas and power markets are to remain tight Both oil and European gas prices may be off those highs we saw earlier in the year, and immediate gas supply worries have eased recently. Demand concerns, however, are weighing on sentiment for oil. We do expect both markets to tighten again in 2023 and that, of course, suggests higher prices. European utilities are resilient but not immune to crises European utilities will continue to be driven by opposing forces in 2023. The recent financial distress of a few strongly dependent on Russian gas supply is concerning. Nevertheless, the reality is that most fared very well this year and will continue to do so in the next. The growth in renewables, batteries, CCS and hydrogen infrastructure In 2023, we expect key technologies, including wind, solar, batteries, CCS and hydrogen infrastructure, to continue growing. Headwinds from supply… Read More »2023 energy outlook: From power to utilities to renewables

Western economies are in decline while hiking rates as recession here looks more likely. Where will the USD go in 2023 and what is the outlook for US equities into the new year? Clifford Bennett talks with Andrew Geoghegan on The Drop ausbiz TV.

Gold price looks to end 2022 flat at around $1,800. Fed’s policy outlook and performance of Chinese economy will impact Gold price in 2023. Market positioning and technical outlook suggest that XAU/USD could stay bullish next year.  Gold price started 2022 in an indecisive manner after having spent the last quarter of 2021 fluctuating at around $1,800. Toward the end of February, XAU/USD rose sharply and reached its highest level since August 2020 at $2,070 in early March. During the second and third quarters, however, Gold price fell substantially and registered losses for seven straight months, coming in within a touching distance of $1,600 for the first time since April 2020 in September. Gold price recovered decisively and gained more than 8% in November and managed to continue to edge higher in the first couple of weeks of December, returning to the mid-point of its annual range near $1,800. Gold price in 2023 will be driven by two major factors: The Federal Reserve’s monetary policy and the performance of the Chinese economy. To have a better understanding of the big picture, we will also take a look at market positioning and supply-side dynamics. Gold price in 2022: A year in… Read More »Gold Price Annual Forecast: Will 2023 be the year Gold shines?