DAILY MACRO
Markets remain fixated on anything that involves inflation and most of the China headlines are leading many to believe the Fed hawks might indeed be proven right.
Busy corporate issuance -- including a big Amazon deal -- fueled the rise in Treasury yields, offsetting downward pull of weaker German CPI& softer U.S. house prices & consumer confidence. 2-10 year-Treasury curve inversion narrowed to -74bp from last week`s multi-decade 77.7bp low.
Rising rates & Persistent inflation continued to weigh on confidence but the labour market prospects were a shade less dreary. Today : ADP, Jolts, pending homes pre beige book and Powell- obviously Friday payroll & Dec. 13 CPI are key for Dec. 14 FOMC.
Oil’s rally ran out of steam after reports that OPEC+ might end up keeping their output steady. JPM :"Despite more pessimistic balances over the next few months, Brent might average $90/bbl in 2023 and $98/bbl in 2024,"
Price action at around 10 dma at 1.0345
Support is at the 21-day MA at 1.0224 and break increases downward momentum
China`s air traffic has sunk down to 35% of what it was in 2019.Official Nov mfg PMI 48.0, Services 46.7 - deep contraction - however Yuan recovery continues- ignores China stocks- .buoyed by news China to ramp up vaccinations for elderly.Choppy trading in a wide 7.0500-7.2500 range
GBP consolidating its 17.7% recovery from September`s mini-budget record low to last week`s 1.2153 peak just below 200-dma.
Winter sets in and domestic fundamentals weigh.UK fresh food prices climb record 14.3% in November – BRC . Cost of living crisis suggests nurses strike the first of many.Bailey said that conditions in the gilt market had not yet returned to normal.
Under pressure 1.1955 ( 10dma) is major support- Sustained break would test 1.1762( 21 dma)
October prelim IP -2.6% m/m (exp -1.5%).
USDJPY broadly mirrors moves in US yields, currently up- still at recent core 137-142 range.
Markets exuberant about Q2 GDP today - economy likely slowed to annual 6 % in Jul-Sept. However it`s the Trade deficit that matters for Rupee . Cash appears to have been a month end aberration for now but the risk is embedded. Monthly close above 81.67 to reinvigorate upside momentum .