Olivia

In today’s live stream, Michael is cautious as he believes the market can make new lows next year towards SPX 3100.

EUR/GBP Looking at EURGBP’s chart, we can see that the FX pair is traded 20 pips below its resistance level at around £0.8580. Today, if failed to break though the rate of £0.86, then we could expect it to drop further towards its next support level at around £0.8550 otherwise it should continue rising towards its next resistance level at around £0.8640-0.8650.

Gold recently corrected a large part of its previous move, but later traded above an important resistance level. Will it be able to sustain this move? The above chart features gold price in terms of weekly candlesticks. As you can see, it just approached its August high. The resistance is provided by the weekly closing prices, and since the current week ends today (Dec. 2), it’s likely that gold’s rally was just stopped or that it will be stopped today. Gold, just like many other markets, recently corrected ~38.2% of its previous move. Yesterday, however, gold rallied above this important resistance level. Now, the question is: will gold be able to hold this move, or will it invalidate the breakdown shortly? The RSI just moved above 70, and it’s a classic sell signal, which had worked many times before. The weekly resistance that I wrote about earlier is an important factor as well. Silver moved higher to a much bigger extent than gold did in today’s pre-market trading, and while the size of both moves is not huge, it’s something that confirmed the previous indications, and it’s a bearish sign. The reason is that the silver market is much smaller… Read More »Will gold be able to stay above its resistance level?

Given the events of 2011 and 2012 in the Eurozone, the rapid rise in interest rates over the course of this year fueled concerns that some countries could come under pressure again. The European sovereign debt crisis was triggered by misreporting of public budgets (Greece), high foreign debt and bank distress, mainly due to burst real estate bubbles, which all resulted in an acute need for financing. This is a crucial difference from the current situation. The increase in financing costs will be a continuous process for public budgets. Only those parts of the public debt that will expire and thus have to be refinanced, as well as new debt, will be affected. The European Commission expects interest payments to rise by an average of just twotenths of economic output in the Eurozone next year. A considerable part of this is attributable to France alone. In Italy, by contrast, interest payments should remain stable relative to economic output in 2023 compared with 2022. The European Commission also expects interest payments to increase only very slowly in 2024. While higher inflation due to higher interest rates has a slow negative impact on government budgets, immediate positive effects come from revenues. Inflation… Read More »Yield spreads should remain lower

This week, we published our latest global economic forecasts for 2023 and 2024 in The Big Picture – Recession with different undercurrents, 28 November. We expect the western economies to fall into a recession next year, but the drivers and length of the weakness vary between different areas. The euro area is on the brink of a recession already now, as the high inflation from energy supply shortages weighs on real incomes. Furthermore, we expect a ‘double-dip’ recession also on the H2 of 2023, as the impact from tighter financial conditions and the slowdown in the US weigh on growth. Colder weather has once again lifted natural gas and electricity prices from mid-November, highlighting how the energy supply situation still remains tight. While we forecast a modest recovery in 2024, limited energy supply will remain a structural hurdle constraining growth for years to come. The near-term outlook for US remains somewhat more upbeat although some of the leading indicators, including Chicago PMIs released this week, have already fallen to recessionary levels as well. We expect US economy the fall into a recession starting from Q2 next year, but compared to the euro area, the US recession will be more traditional… Read More »Easing rate hike fears support market sentiment

The Bank of Canada's policy meeting will be the highlight of next week, and it's a very close call on whether to expect a 25bp or 50bp hike. For now, we favour the latter given robust third-quarter GDP data, ongoing elevated inflation readings and a tight jobs market. US: Recession fears remain elevated We are rapidly heading towards the 14 December FOMC meeting where a 50bp interest rate hike looks likely after four consecutive 75bp moves. Nonetheless, the Federal Reserve will not be pleased with the recent sharp falls in Treasury yields and the dollar, which are loosening financial conditions and undermining the Fed’s efforts to beat inflation down. Consequently, we are likely to see strong messaging in the press conference and the accompanying forecast update that the rate rises are not finished and that the policy rate is set to stay high for a prolonged period of time. Markets are likely to remain sceptical given that recession fears remain elevated. Softening consumer confidence, weaker ISM services and a relatively subdued PPI report are unlikely to do the Fed many favours next week in this regard. Canada: Favour 50bp however a very close call In Canada, the highlight will be the central bank policy meeting… Read More »Key events in developed markets next week

Summary United States: Payrolls Beat Expectations, but Signs of Moderation on the Horizon Total payrolls rose by 263K in November, with the unemployment rate holding steady at 3.7% and average hourly earning rising by 0.6%. Personal income and spending increased 0.7% and 0.8%, respectively, in October, while the core PCE deflator increased 0.2% (MoM) and 5.0% (YoY). The ISM manufacturing index fell to 49 in November, while construction spending slipped 0.3% in October. Next week: ISM Services Index (Mon), Trade Balance (Tue) International: Is This the Peak? There have been recent signs that inflation might have peaked in some countries. In November, Eurozone price pressures cooled for the first time in over a year, as headline CPI slowed to a 10% year-over-year rate, from 10.6% in October. In addition to the Eurozone, Australian inflation data also showed an unexpected softening in price pressures. In October, headline CPI receded to 6.9% year-over-year. Next week: Reserve Bank of Australia (Tue), Bank of Canada (Wed), Mexico CPI (Thu) Interest Rate Watch: FOMC Set to Hike by 50 bps on December 14 Fed Chair Powell indicated in a speech this week that the FOMC likely will hike rates by 50 bps, instead of its… Read More »Weekly economic and financial commentary

A litany of central bank meetings lies ahead in the first half of December. The ball will get rolling with the Reserve Bank of Australia and the Bank of Canada next week, both of which are expected to raise interest rates again, albeit at a slower pace. Meanwhile in America, business surveys and producer prices will shape expectations around Fed policy, helping investors decide whether the dollar’s best days are behind it. 

Tomorrow has the all-important release of US labor market numbers. But the Fed's Powell kind of already robbed the thunder from the release during his speech at the Brookings Institute yesterday. He basically implied that the Fed would start slowing down its tightening at the next meeting. Naturally the market jumped and the dollar weakened in response. Now the question is whether there will be follow-through on the optimism with the jobs numbers. November's NFP is expected to come in lighter compared to the prior month, but it should be noted that the data has been markedly outperforming expectations lately. Taken in context of the latest BLS report showing that the labor market remained tight, the consensus for what to expect out of NFP has drifted up, slightly. A week ago, analysts were forecasting 200K jobs added, but that has now moved up to 210K jobs, compared to 261K in October. The trends remain favorable Prior to covid, a 210K jobs report would be considered relatively good. But referring back to the BLS report that came out yesterday, there are some worrying signs. As mentioned, in October there were 261K jobs created, but 353K jobs went off the market. Meaning… Read More »US NFP and how the market could react

Tomorrow has the all-important release of US labor market numbers. But the Fed's Powell kind of already robbed the thunder from the release during his speech at the Brookings Institute yesterday. He basically implied that the Fed would start slowing down its tightening at the next meeting. Naturally the market jumped and the dollar weakened in response. Now the question is whether there will be follow-through on the optimism with the jobs numbers. November's NFP is expected to come in lighter compared to the prior month, but it should be noted that the data has been markedly outperforming expectations lately. Taken in context of the latest BLS report showing that the labor market remained tight, the consensus for what to expect out of NFP has drifted up, slightly. A week ago, analysts were forecasting 200K jobs added, but that has now moved up to 210K jobs, compared to 261K in October. The trends remain favorable Prior to covid, a 210K jobs report would be considered relatively good. But referring back to the BLS report that came out yesterday, there are some worrying signs. As mentioned, in October there were 261K jobs created, but 353K jobs went off the market. Meaning… Read More »US NFP and how the market could react