DAILY MACRO
They might be slowing down, but they aren`t getting any less aggressive.What they anticipate will happen next has been consistent: They are all undoubtedly hawkish setting up an early 2023 that could look awfully similar to 2022. Sinply put , hopes for a dovish turn from global central banks proved premature & ECB absolutely hammered the point home.
As global supply chains unsnarl and energy prices moderate, the inflation story has become more focused on the labour market. In particular, higher wages may flow through to higher prices, especially for services.The bottom line is that so long as labour markets remain ultra-tight, central banks will continue to be wary.
Retail sales fell 0.6% in November -instead of strengthening resolve in a pivot, it added to worries about a hard landing. USD index to close above 104.11 today to regain traction on the upside .
DAX dove 3.28%, falling faster than U.S. equities, on the realization that growing European debt will be harder to finance amidst rising rates & recession risk. Emblematic of EZ debt financing risk was the 18bp surge in 10-year BTP-bund yields - key EUR negative and hence EUR/USD retreated sharply from 1.0737 trend high by 61.8% 1.1495-0.9528 drop at 1.0744. Expect Downmove on break below 1.0592.
6.9300-7.0000 consolidation continues but risk of break higher increasing.
BoE did hike 50 bps as generally expected but on split vote-6 voted for 50 bps hik while 2 wanted 25 bps and 1 voted for 75 bps (Catherine Mann). However the tone of accompanying comments was more balanced. Still, BoE said the labour market remains tight, wage growth is elevated & it will act forcefully as needed. Tenth consecutive BoE rate hike expected on Feb. 2 (25 bps fully priced).GBPUSD fell 2% to its lowest since last week`s 1.21085 pullback low near the 200 dma- break there sets up a downmove for 1.1960.
USD/JPY up large from 135.58 ascending 200-DMA area, underlying support- traced out a three-candle reversal, though a close above 137.97 still looks unlikely. 135.00 138.00 core range stays in tact for long .
Nov Trade deficit at $23.89 billion. April-Nov 22 at $198.35 billion ( $115.39 billion in Apr Nov 21) - numbers are frightening especially with the current erosion of carry and higher cost of global capital. But markets stay in denial mode - it cant happen to us - .Upmove past 82.80 to challenge 83.30 .Intervention supplies may be muted as the Pivot trader reassesses.