Senior Relationship Manager
Summary: CPI and nothing else matters
Good morning,
Heading into the most important day of the week, there are lots of news but so far little action.
Gold and Silver remain near the top, yields decline slightly, stocks gain moderately, and all eyes seem to be on the CPI release for clear guidance.
The CPI is expected at 3.4% annually with a span from 3.2% and 3.5% from 50 analysts, the core is expected at 3.7% with high and low estimate at 3.6% and 3.8%.
While the PCE is normally the number the Federal Reserve heeds more, the consumer Price Index finds more attention in the media and may in the short term cause a stronger reaction accordingly.
A higher number would likely cause a risk-off move with Equities higher, Bonds lower, Yields higher and the USD stronger. Precious Metals Traders are expecting the number to either cause a continuation of the upward move or as a reason for the maybe long due correction.
The RSI for Gold as well as Silver is well above 70, indicating we are overbought and call if not for a correction at least a sideways period to normalize the move. At the same time, the strength in the precious metals is getting more and more attention and may well draw in buyers. Gold is currently at 2358 and Silver 28.15.
With the US CPI and the Fed Minutes later today and the ECB tomorrow, EURUSD may well be worth a look. We have been going nowhere for a while now and the implied volatility is at 5.6%, well below the longer-term average at 6.4%. We are trading at 1.0850 and any shift in the rate outlook should cause moves.
GBPUSD is at 1.2680 and USDJPY 151.80. The USD Index is holding above 104 at 104.15.
Bitcoin retreated off the 70 again to 69.300 and Ethereum is at 3542.
The US500 is trading at 5215, the US 30 38920 and the US Tech 100 NAS and the GER 40 both near 18200. Crypto shares fell and Moderna rose after announcing that their cancer vaccination may show promise.
Today, as said, all focus will be on the CPI but bear in mind that the Fed Minutes may also be important if there are any surprises.
Consider how much risk you want to carry into he numbers if you are a trader, there is a decent risk of sharp moves on any surprise – we have commonly seen a delayed strong reaction that last few months as well.
Trade safely!
Wednesday
- Data AU Rate decision, US CPI, Golsbee speaks, Fed minutes,
Thursday
- Data China M2, CPI and PPI, ECB Rate, US Initial Jobless Claims, PPI, Feds Collins, and Bostic speaks.
Friday
- Data China Trade Balance, DE&SWE&FR CPI, US Import Prices Bostic and Daly speak.
- Earnings: Blackrock, JP Morgan, Wells Fargo, State Street, Citigroup
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.