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Markets After a bumper nonfarm payrolls print, market attention turns to US CPI on Wednesday. A slowdown in inflation remains the base case, but details of the CPI data will be critical. Back-to-back storming inflation prints will likely lead to complete repricing of the September Fed meeting and, ultimately, where the Fed ends up. Still, last Friday's payroll report indicates an overheated labour market that continues to tighten further. Hence at minimum, the markets expect another 100bp of Fed funds rate increases over the next three meetings: +50bp in September and +25bp in November and December, with risks skewed towards significant increases.  The FOMC would prefer to decelerate the pace of rate hikes, but the data permits them to do so. Lately, the data the FOMC uses as critical inputs for its decision-making process has shown signs of an overheated labour market and intense wage pressures. Hence this week's inflation report seems very unlikely to offer “compelling evidence” of a slowdown needed for the Fed to pull away from its aggressive inflation-fighting mode.   Oil Brent has fallen to a 6-month low, with analysts struggling to produce a satisfactory explanation when investors ask why.  The broader market sentiment has turned negative… Read More »Bumper payroll report , CPI up next

S&P 500 bearish overtures were refused, bonds remained optically risk-on and strong, but the true picture reflects a daily stall. Refusal to drive prices higher in the absence of convincing, credibly strong NFPs. I have a hunch that a careful look under the hood would reveal some signs of weakness in the job market, the way hours worked last time did. While the Fed isn‘t drumming this point really as tightening would come at the expense of unemployment rate, because wage inflation needs to be broken down as well in order to get overall inflation under control. Some officials such as Kashkari aren‘t hiding the fact it would take several years to achieve the 2% goal again. Let‘s have a look at yesterday‘s Bank of England moves, kind of foreshadowing what‘s reasonable to expect from the Fed. In the UK, the prospect of entering recession Q4 2022 amd remaining in it for more than a couple of quarters, is being acknowledged. The central bank though intends to keep tightening anyway, preferring to take on inflation after it ran out of control longer they publicly anticipated. Meanwhile in the States, unemployment claims have edged higher – indicative of growing softness in… Read More »Bull trap ready

USD/CAD holding steady ahead of jobs data USDCAD shifted to the sidelines immediately after charting a new lower low at 1.2766 in the short-term picture, unable to reach the constraining 20-day simple moving average (SMA).   The technical indicators state a bearish-to-neutral bias as the RSI keeps flattening marginally below its 50 neutral mark and the MACD is extending its short horizontal move slightly below zero around its red signal line. Hence, traders may keep directing the market sideways unless they see a break above the 20-day SMA at 1.2900, and more importantly, a close above the 1.2963 restrictive zone. If that turns out to be the case, the bullish correction could ramp up to 1.3026, where the flattening 200-weekly SMA has been ceasing upside pressures over the past two months. Higher, a rally above the 1.3077 – 1.3120 resistance region could clear the way towards the 1.3222 top. Should sellers retake control, initial limitations could occur around the 1.2800 level. A successful step lower may then halt around the 200-day SMA at 1.2740, a break of which could re-test the restrictions within the 1.2960 – 1.2940 zone before stretching towards the 2021 support trendline seen at 1.2612. Summarizing, USDCAD is in a… Read More »USD/CAD holding steady, GBP/JPY tests support trendline [Video]

There's no such thing as a quiet week in the markets these days and this week has undoubtedly been no different. The jobs report was always expected to be the highlight but the Bank of England gave it a good run for its money on Thursday, hiking by the most in 27 years while putting out some pretty dire economic forecasts. It would appear we have very little to look forward to for the next couple of years here in the UK. While I believe other central banks are slowly gravitating toward the economic reality of soaring energy costs, high and widespread inflation, and rapidly rising interest rates, the BoE has very much been at the forefront of accepting the country's fate. That's probably as much a reflection of the fundamental shortcomings as much as anything but the latest forecasts really were especially bleak and may make some other countries, particularly across Europe, a little nervous. The US may already be in a technical recession, depending on your definition, but the economy is still in very good shape. The jobs report is expected to show that once more today, with 250,000 jobs forecast to have been added last month leaving… Read More »The goldilocks report

In this week’s Live from the Vault, Andrew Maguire is joined once again by Craig Hemke, founder of the TF Metals Report, to discuss the Fed’s refusal to accept the US is slipping into a recession. The two industry allies contemplate the approaching end of the COMEX’s confidence scheme, as investors wake up to widespread spoofing and join the mass exodus to fairer alternatives.

The price of the Australian Dollar almost stabilized on Friday. The Moving Average indicator maintains its bullish price signals. The momentum oscillator, the Relative Strength Index, remains within its normal zone; rising momentum will confirm the continuation of the uptrend. During today's European session, the AUD/USD pair traded inside a tight range. without making any significant breakthrough. Therefore, the difference between the day's high and low did not surpass 30 pips. At press time, the AUD/USD was trading at 0.6950, down 0.0020 or 0.29% for the intraday. This analysis relies on a 4-hour timeframe On a four-hour timeframe, the Moving Average Indicator reading reveals bullish signals. The signal indicates the continuance of the bullish trend in the short term. whereas the 50-MA rises above the 100-MA. In the meantime, the 100-MA rises above the 200-MA, supporting the bullish trend over the longer period. With a score of 52.8 on the value line, the Relative Strength Index remains in the neutral range. Any increase in the RSI would protect the Australian dollar from sliding back below the descending trendline. During the preceding two trading sessions, the AUD/USD exchange rate has been quite stable. Therefore, if the AUD/USD wants to maintain its… Read More »The intraday AUD/USD spot price has been very consistent during Friday’s prior trading sessions

Summary If the U.S. economy is in a recession, no one seems to have told employers. Nonfarm payroll growth in July was more than double the Bloomberg consensus, registering a 528K monthly gain. This marked the second fastest pace of job growth in 2022. Employment growth was broad-based with nearly all major sectors adding jobs in the month. Average hourly earnings data added further fuel to the fire, increasing 0.5% in the month and 5.2% over the past year. The unemployment rate fell a tenth of a percentage point to 3.5%, which matches the 50-year low reached in 2019. Broadly speaking, the economic data are sending mixed messages at present, and the white-hot payroll numbers look increasingly out-of-line with other data points. That said, employment growth of more than half a million jobs per month and a falling unemployment rate are hard to ignore, and we suspect this data will give the FOMC the confidence it needs to push ahead aggressively with its fight against inflation. At least a 50 bps rate hike at the September 20-21 FOMC meeting seems likely at this point in time, and yet another 75 bps hike could be in store if inflation over the… Read More »Employment report: Fireworks in July

The US economy created 528K new jobs in July, doubling expectations and exceeding the peak employment level set before the pandemic. Notably, construction and manufacturing recovered, probably due to falling commodity prices in these sectors. The hourly earning rate has maintained at 5.2% y/y with an upward revision of the previous month and a gain of 0.5% for July. The unemployment rate declined from 3.6% to 3.5%, but this is mainly due to a decline in the active labour force from 62.2% to 62.1%. Such strong employment growth data came as a surprise to the markets. And understandably so, with the latest economic assessments betraying this picture. Weekly jobless claims have remained on an upward trend since March, and this divergence is not easy to explain. A solid increase in employment plus faster wage growth is raising expectations of a third consecutive 75 points Fed rate hike in September. CME's FedWatch tool shows a 69% chance of such a move, double that of a day ago versus 3.4% a month ago. This is obviously positive news for the dollar and negative for the stock market. Earlier in the week, Fed officials promoted the idea that markets were underestimating the central… Read More »Dollar soars as strong job growth paves the way for the third 75 points rate hike

Summary The Reserve Bank of Australia (RBA) raised its Cash Rate by 50 bps to 1.85% at its August meeting and signaled that further rate hikes will be needed to bring inflation back toward target over time. Several elements of the monetary policy announcement were essentially unchanged from previous meetings. However, there were also some important changes in language that lead us to believe the RBA will revert to smaller hikes going forward. Notably, the central bank indicated that while further normalization of policy is expected in the months ahead, it also noted that policy is “not on a pre-set path”. The RBA also dropped references to “extraordinary monetary support” that had appeared in previous announcements, suggesting it now sees itself a bit further along the monetary tightening path, and perhaps does not need to move at an accelerated 50 bps pace anymore. Given these changes, we believe the RBA will be more flexible moving forward with regard to the size and timing of future rate hikes. With signals of further tightening but more flexibility, we now expect 25 bps rate hikes at the RBA's next several meetings in September, October, November, December and February, which would see the Cash… Read More »Reserve Bank of Australia sees flexible path forward

US CPI (Jul) – 10/08 – with US CPI reaching another 40 year high of 9.1% in June, there was some concern that the Federal Reserve might have been tempted to go for a bigger than expected 100bps rate move in July. While the headline number grabbed all the attention it was notable that core prices fell back from 6% to 5.9%. Concerns about a 100bps rate move in July didn’t last very long as two of the most hawkish members of the FOMC pushed back against the idea, saying that they felt that 75bps was sufficient. Since those numbers were released, the debate has moved on a touch with concerns over a recession now outweighing concerns over aggressive central bank tightening. Bond market pricing since the June CPI numbers were released has seen prices rally strongly and yields fall back. Part of the reason for this change of tack has been the belief that while the Federal Reserve is likely to continue to talk tough on inflation in the short term, and continue to hike rates into year end, they will find it difficult to continue to do so into next year. We’ve already started to see weakness in… Read More »The Week Ahead: US CPI, UK Q2 GDP, Deliveroo, Aviva and Disney results