Macro: Sandcastle economics
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Morning Brew November 18 2022
Erik Schafhauser
Senior Relationship Manager
Summary: Consolidatoin mode
Good Morning,
Markets are clearly looking for direction and did not find it yesterday. Stocks swung and closed a little lower in low volumes, the USD Index continued to trade around 106.50 and the 10 year yield 3.75.
EURUSD trades near the 1,04 at 1.0378 USDJPY at 139.80 and GBPUSD at 1.39. Gold and Silver recovered off yesterday’s lows to trade 1765 and 21.15.
The US yield curve remains firmly inverted, hinting at a recession, the probability of a hike by only 50 basis points in December has risen to 87% but the terminal rate expectation n May/ June has risen to 5% from 4.9 earlier in the week.
Today’s calendar contains little of note, there can be comments out central banks and politics at any time though.. One of the key events today will be might be the ECB which is beginning the biggest withdrawal of cash from the euro zone's banking system in its history, as it gives banks a first chance to repay hundreds of billions of euros in ECB loans. As this is the first time this is being undertaken, the market impact is not fully clear. It could give an indication of the state of the European economy.
The next really huge day to already pencil into the calendar is the 14th nd 15th of December, where the Fed, the SNB, the BoE and the ECB will set rates, up to then, economic indicators confirming inflation and strenght of the labor market will be wathed.
James Bullard of the St. Louis Fed President stated the Fed needs to keep raising rates given that its tightening so far "had only limited effects on observed inflation."
Cisco rose 5% after the company raised it`s forecast
Trade safely.
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