Analysts Predict Cyber Monday Sales to Reach Record $11.2 Billion

The U.S. Christmas spending season opened with a bang on Black Friday with consumers spending a record $9.12 billion online shopping, according to Adobe, which track’s sales on retailers’ websites.

Adobe also reported that overall online sales last Friday were up 2.3% year over year, with toys leading the way with a surge of 285% over an average day in November. Electronics were also a major contributor, up 285%, as was exercise equipment, up 218%.

Black Friday shoppers also broke a record for mobile orders, as 48% of online sales were made on smartphones, and increase from 44% last year.

Sales on Thanksgiving also exceeded expectations with consumers shelling out an all-time high of $5.29 billion online, up 2.9% year-over-year. Typically, shoppers spend about $2 billion to $billion on line in a day, according to Adobe.

Rounding out the week, e-commerce activity was expected to remain strong on Saturday and Sunday with Adobe expecting consumers to spend $4.52 billion and $4.99 billion, respectively.

Record Spending Expected to Continue

With Black Friday in the books, consumers are now looking forward to spending even more on Cyber Monday, the biggest U.S. online shopping day. Adobe Analytics is expecting record spending of about $11.2 billion with consumers looking to take advantage of discounts.

Adobe predicts spending on Cyber Monday to rise 5.2% as inflation-weary consumers have been waiting for weeks in the hopes of taking advantage of deep post-Thanksgiving markdowns.

Retailers Hoping for Strong Numbers

Recently, retailers Target, Macy’s and Nordstrom reported a lull in sales in late October and early November as consumer sentiment weakened while inflation hovered near a 40-year high.

However, there seems to be a ray of optimism being fueled ahead of Monday’s big single day shopping event with Target, Macy’s and even Best Buy, now expecting a return to pre-pandemic shopping patterns.

For a look at all of today’s economic events, check out our economic calendar.

US Mortgage Rates Fall for a Second Week but Remain Elevated at 6.58%

In the week ending November 24, mortgage rates fell for a second consecutive week. 30-year fixed mortgage rates slipped by 0.03% to 6.58%, following a 47-basis point tumble in the previous week.

Following the latest decline, rates are up 159 basis points from the August 3 most recent low of 4.99%. 30-year fixed rates were up 348 basis points year-over-year.

Economic Data from the Week

In the early part of the week, there were no US economic indicators to influence US Treasury yields and US mortgage rates. Freddie Mac’s weekly survey was for the week ending Tuesday, November 22, because of the US Thanksgiving holidays.

Bets of a Fed pivot continued to support a pullback in mortgage rates ahead of a busy Wednesday session.

However, it was a busier mid-week session on the economic calendar, with US private sector PMIs, weekly jobless claims, and consumer sentiment figures in focus. The stats supported the market bets of a December Fed pivot. Significantly, the Services PMI fell from 47.8 to 46.1, with the weekly jobless claims up from 223k to 240k.

Despite Fed monetary policy moves, labor market conditions remain robust, supporting consumer confidence and spending. The November Michigan State Consumer Sentiment numbers reflected the mood, rising from 54.7 to 56.8.

On Wednesday, the FOMC meeting minutes also delivered a pullback in US Treasury yields, with Committee members talking about slowing the pace of rate hikes.

The weak economic Indicators and the FOMC meeting minute should support another pullback in mortgage rates for the week ending November 30.

Freddie Mac Rates

The weekly average rates for new mortgages, as of November 23, 2022, were quoted by Freddie Mac to be:

  • 30-year fixed rates slipped by three basis points to 6.58%. This time last year, rates stood at 3.10%.
  • 15-year fixed rates fell by eight basis points to 5.90%. Rates were up by 348 basis points from 2.42% a year ago.

According to Freddie Mac,

  • Mortgage rates continued to fall, though increased mortgage rate volatility has tested buyer demand.
  • After rising above 7%, rates have tumbled by half a percentage point in a few weeks.
  • Building permit figures reflected uncertainty over demand, with permits sliding by 3.3% in November.

Mortgage Bankers’ Association Rates

For the week ending November 18, 2022, the rates were:

  • Average interest rates for 30-year fixed with conforming loan balances decreased from 6.90% to 6.67%. Points rose from 0.56 to 0.68 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA fell from 6.93% to 6.66%. Points increased from 0.99 to 1.01 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 6.51% to 6.30%. Points rose from 0.64 to 0.74 (incl. origination fee) for 80% LTV loans.

Weekly figures released by the Mortgage Bankers Association showed that the Market Composite Index, a measure of mortgage loan application volume, increased 2.2% in the week ending November 18. The Index increased by 2.7% in the week prior.

The Refinance Index increased by 2% and was 86% lower than the same week one year ago. In the previous week, the Index declined by 2%.

The refinance share of mortgage activity increased from 27.6% to 28.4%. The refinance share fell from 28.1% to 27.6% in the previous week.

According to the MBA,

  • 30-year fixed rates fell for a second consecutive week and are now down almost 50 basis points from the most recent peak of 7.16%.
  • The downward trend in mortgage rates should support purchasing power.
  • Both purchase and refinance applications rose last week, though refinance activity remains more than 80% below levels seen a year ago.

For the week ahead

It is a relatively quiet first half of the week. Consumer confidence figures will draw interest ahead of another busy Wednesday. On Wednesday, ADP nonfarm employment change, inflation, and JOLTs job openings will provide US Treasuries and mortgage rates direction.

From the week prior, the FOMC meeting minutes will set the tone, however. The latest minutes and last week’s stats have refueled bets of a Fed December pivot. This weekend, the probability of a 75-basis point December rate hike stood at 24.2%, unchanged from last weekend.

While the stats will influence, FOMC member chatter will also drive yields. FOMC members have delivered mixed signals since the last FOMC meeting, leaving some uncertainty for the markets to tackle.

Crypto Market Daily Highlights – DOGE and XRP Buck the Top Ten Trend

Key Insights:

  • It is a mixed Friday session for the crypto top ten. DOGE leads the way, with XRP also bucking the broader market trend.
  • A quiet crypto session, with a sharp decline in trading volume over Thanksgiving, left the NASDAQ Composite Index to weigh on sentiment.
  • The crypto market cap is down by a modest $2.8 billion to $789.1 billion, with 45 minutes of the session left.

It is a mixed Friday session for the crypto top ten. DOGE leads the way, with XRP also finding support. However, BTC joined the broader market in the red while avoiding sub-$16,000 for the third consecutive session.

With the US Thanksgiving holiday, it was a quiet Friday session, with trading volumes down through the afternoon session.

Graphical user interface, chart, histogram Description automatically generated There were no material updates on FTX to provide direction, leaving the NASDAQ Composite Index to test buyer appetite. In a shortened holiday session, the NASDAQ fell by 0.52%. Disappointing Black Friday updates and concerns over the fresh wave of COVID-19 cases in China weighed.

NASDAQ correlation.
Total Market Cap – NASDAQ – 261122 5 Minute Chart

While FTX contagion eased this week, investors need to wait for updates from FTX debtors. News of new asset discoveries would further reduce FTX contagion risk. However, contagion risk will remain over the near term, which will likely continue to peg the market back from a full recovery.

Investors await the identities of FTX’s creditors, which the Court agreed to redact this week.

Today, the crypto news wires will remain the investor focal point.

Crypto Market Set to End Three-Day Winning Streak on Thin Trading

It is a bearish Friday session. The crypto market slid to a mid-morning low of $776.6 billion before rebounding to a high of $798.5 billion.

However, easing back through the afternoon session, the crypto market is down $2.8 billion to $789.1 billion, with 45 minutes remaining. The market is down $182 billion for November.

Crypto market in the red.
Total Market Cap 261122 Daily Chart

The Crypto Market Movers and Shakers from the Top Ten and Beyond

It is a mixed Friday session for the crypto top ten.

DOGE leads the way, rallying by 9.83%, with XRP up by 1.85%.

However, the rest of the top ten are in the red, with 45 minutes (UTC) of the session remaining.

ADA (-0.32%), BTC (-0.43%), ETH (-0.28%), and MATIC (-0.81%) are heading for daily losses. BNB is currently flat for the session.

From the CoinMarketCap top 100, it is a mixed session.

Huobi token (HT) leads the way, gaining 17.6%, with DOGE and casper (CSPR) up by 9.83% and 3.7%, respectively.

However, binaryX (BNX) leads the way down, falling by 8.31%, with UNUS SED LEO (LEO) and kava (KAVA) down by 8.49% and 5.69%, respectively.

24-Hour Liquidations Hold Steady as Thanksgiving Lull Continues

Over 24 hours, total liquidations held steady on Friday amid lower trading volumes. At the time of writing, 24-hour liquidations stood at $45.76 million versus $43.88 million on Friday morning.

Liquidated traders over the last 24 hours also held steady. At the time of writing, liquidated traders stood at 15,477 versus 15,589 on Friday morning. However, liquidations were up over 12 and four hours and over one hour.

Crypto liquidations hold steady.
Total Crypto Liquidations 261122

According to Coinglass, 12-hour liquidations rose from $15.10 million to $16.36 million, with four-hour liquidations up from $1.33 million to $5.14 million. One-hour liquidations were up from $2.27 million.

The chart below shows market conditions throughout the session.

Crypto market range-bound in the US session.
Total Market Cap 261122 Hourly Chart

German Consumer Sentiment Raises Red Flags for the ECB

It was a relatively busy start to the day for the EUR/USD on the economic calendar. The German economy was back in focus. Finalized Q3 GDP and GfK Consumer Climate figures for December drew interest.

Were revisions to German GDP Data Enough to Shift ECB Policy Sentiment?

According to Destatis, the German economy expanded by 0.4% in Q3 versus a prelim 0.3%. The German economy grew by 0.1% in Q2.

The upward revision supports the ECB’s plans to continue hiking interest rates to bring inflation to target.

Some key takeaways from today’s report included,

  • Household final consumption expenditure increased by 1.0%, while government final consumption expenditure was flat, quarter-on-quarter.
  • Improving supply chains supported a 2.0% increase in exports and a 2.4% rise in imports.
  • GDP in the Q3 was up 1.2% from Q3 2021. Notably, GDP exceeded pre-pandemic levels for the first time.
  • Year-over-year, employment increased by 490,000 (+1.1%) to another record high.
  • Increased spending led to a fall in the savings rate to 9.6%. In the previous year, the savings rate stood at 10.4%. The trend was in line with the ECB’s view on consumer confidence and saving.

However, disappointing consumer sentiment figures overshadowed the Q3 GDP numbers.

How Did Consumer Confidence Fare Ahead of the Holiday Season?

The GfK German Consumer Climate rose from -41.9 to -40.2 for December. Economists forecast an increase to -39.6.

In November, the propensity to buy fell by 1.1 points to -18.6, leaving it down 28.3 points compared to November 2021. However, the income expectations indicator increased by 6.2 points to -54.3. Despite the rise, income expectations are still down more than 67 points year-over-year.

The economic prospects indicator increased by 4.3 points to -17.9 points. While the economic prospects and income expectations indicators rose, consumers expect hefty energy bills in the coming months that could see consumers tighten their purse strings, a negative for the growth in Q4 and early 2023.

A sharp decline in spending could question the ECB’s growth and policy outlook.

How Did the EUR Respond to Today’s Stats?

In response to today’s numbers, the EUR/USD rose to a post-stat high of $1.04226 before falling to a post-stat low of $1.04111.

However, despite concerns over consumer confidence and consumption, the EUR held onto early gains.

At the time of writing, the EUR/USD was up 0.06% to $1.04181, down from a current-day high of $1.04293.

EUR/USD tested by German consumer confidence numbers.
251122 EURUSD Hourly Chart

What Else Do Investors Need to Consider Today?

Following today’s stats, ECB member commentary will also need consideration. ECB members Luis de Guindos will speak today. On Thursday, ECB hawk Isabel Schnabel reportedly favored further aggressive policy moves to target inflation. According to Reuters, Schnabel said,

“Incoming data so far suggest that the room for slowing down the pace of interest rate adjustments remains limited, even as we are approaching estimates of the ‘neutral’ rate.”

Aligned with the ECB minutes, Schnabel noted that policy should remain data-dependent.

 

ECB Monetary Policy Meeting Minutes Deliver No Surprises

It was a relatively quiet day on the Eurozone economic calendar. On the data front, the German Ifo Business Climate Index drew interest ahead of the ECB monetary policy meeting minutes.

What Did ECB Monetary Policy Meeting Minutes Reveal?

There were no surprises today. ECB members view inflation as too high and see inflation staying above target for an extended time.

However, the ECB also noted that there were no visible signs of widespread second-round effects, and longer-term inflation expectations remained broader aligned with the 2% target.

Nonetheless, risks to the inflation outlook were on the upside; Inflation could see a further pickup over the medium term.

Amidst persistent inflation, economic activity likely slowed in Q3, and the ECB expects economic conditions to deteriorate further over the remainder of 2022 and early 2023. There are clear downside risks to growth in Q4 2022 and Q1 2023, compared with September 2022 projections.

However, the minutes made no reference to another 75-basis point rate hike in December. The minutes showed that the future path should be based on the ‘evolving outlook for inflation and the economy, following a meeting-by-meeting approach.’

Members argued that the Governing Council should continue normalizing and tightening monetary policy in the case of a shallow recession but pause in the event of a prolonged and deep recession.

The minutes reflected the ECB’s stance on tackling inflation, saying,

“The ECB now needed to show equal determination when inflation was above the target, countering far too high inflation and preventing it from becoming entrenched, irrespective of a deteriorating outlook for economic activity.”

Concerning the December meeting, the minutes noted that the Governing Council would have more information available, with projections extending to 2025.

In the October ECB Press Conference, ECB President Christine Lagarde noted that the ECB would be able to look ahead once the staff projections were available in December.

How Did the EUR Respond to the Minutes?

The EUR/USD responded positively to the minutes, recovering from a pre-release low of $1.03818 to a post-release high of $1.04144. A willingness to stomach a shallow recession and determination to push ahead with normalization and tightening delivered support.

At the time of writing, the EUR/USD was up 0.13% to $1.04084.

EUR/USD responds to ECB minutes.
241122 EURUSD 30 Minute Chart

Earlier in the day, German business sentiment figures surprised to the upside.

How Did the Ifo Business Climate Index Compare with the PMI Survey?

Germany’s Ifo Business Climate Index increased from 84.5 to 86.3 in November. Economists forecast a more modest rise to 85.0.

According to the November survey,

  • Pessimism regarding the coming months reduced markedly, suggesting that the German recession could be less severe.
  • On Wednesday, the prelim November Composite PMI survey revealed a similar trend. The level of pessimism continued to improve from a September low.

As with the Markit survey, sentiment towards current conditions was dire. The Ifo Current Assessment Sub-Index fell from 94.2 to 93.1. The Markit survey highlighted widespread concern about the effects of high inflation, rising interest rates, and heightened levels of uncertainty on investments and economic conditions.

The pickup in business sentiment could incentivize the ECB to continue hiking rates to bring inflation to target. The EUR/USD responded positively to the numbers.

EUR/USD Return to $1.05 Dependent on ECB Chatter and the Minutes

It is a relatively busy day for the EUR/USD on the economic calendar. On the data front, the German Ifo Business Climate Index will draw interest early in the European session.

On Wednesday, Markit’s S&P Global Flash German Composite PMI survey ‘highlighted widespread concerns about the effects of high inflation, rising interest rates, and heightened levels of uncertainty on investments and economic conditions.’

Despite the negative sentiment, the level of pessimism continued to improve since the September low. Better-than-expected Ifo numbers would deliver EUR/USD support when considering the Markit survey results. Economists forecast the Index to rise from 84.3 to 85.0.

While today’s stats will draw interest, the ECB’s monetary policy meeting minutes will likely garner greater interest. Investors will be looking for clues on what to expect next month. Signals from ECB members have been mixed, creating monetary policy uncertainty.

ECB member commentary will also need consideration. ECB members Luis de Guindos, Isabel Schnabel, and Andrea Enria will speak today.

The influence of the ECB minutes and ECB member chatter on the EUR/USD will likely be more than usual following the FOMC meeting minutes from overnight.

EUR/USD Price Action

At the time of writing, the EUR was down 0.01% to $1.03937. A mixed start to the day saw the EUR/USD fall to an early low of $1.03924 before steadying.

EUR/USD holds steady.
EURUSD 241122 Daily Chart

Technical Indicators

The EUR/USD needs to avoid the $1.0366 pivot to target the First Major Resistance Level (R1) at $1.0435. The ECB minutes and member chatter need to be hawkish to support a breakout session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0474 and resistance at $1.05. The Third Major Resistance Level (R3) sits at $1.0583.

A fall through the pivot would bring the First Major Support Level (S1) at $1.0326 into play. Barring a risk-off-fueled sell-off, the EUR/USD pair should avoid sub-$1.030 and the Second Major Support Level (S2) at $1.0257. However, dovish ECB minutes and commentary could deliver a sharp pullback.

The third Major Support Level (S3) sits at $1.0148.

EUR/USD resistance levels in play above the pivot.
EURUSD 241122 Hourly Chart

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA ($1.02863). The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above the 50-day EMA ($1.02863) would support a breakout from R1 ($1.0435) to target R2 ($1.0474) and $1.05. However, a fall through the 50-day EMA ($1.02863) would bring sub-$1.03 into play. The 200-day EMA sits at $1.00845.

EMAs bullish.
EURUSD 241122 4 Hourly Chart

The US Session

There are no US economic indicators for the markets to consider, with the US markets closed for Thanksgiving.

 

RBNZ Forecasts Recession in 2023 as it Delivers Historic Supersized Rate Hike

The Reserve Bank of New Zealand (RBNZ) raised its benchmark interest rate by an unprecedented supersized rate hike of 75 basis points on Wednesday, accelerating its monetary tightening to rein in inflation.

The move lifted the Official Cash Rate to 4.25% from 3.5%. It was the biggest hike since the RBNZ introduced the OCR in 1999 and it took the benchmark to its highest level since 2008. The rate hike didn’t come as a surprise, however, with 15 of 21 economists surveyed by Bloomberg predicting the move.

The RBNZ, which had previously predicted the cash rate would peak at 4%, is now forecasting that the rate will continue to rise, peaking at 5.5% next year, and remaining at that level for about 15 months before dropping.

The decision was in contrast with some of its global peers, however, who are becoming more cautious about rate increases amid risks of a global recession. Policymakers had to make the aggressive decision because five straight 50-point hikes failed to curtail stronger-than-expected inflation and near-record low unemployment.

RBNZ Hints at More Hikes Ahead

RBNZ Governor Adrian Orr said that the bank’s sole target is to get the OCR to a point where inflation can be worn down.

“Our core inflation rate is too high,” Orr said in a press conference, adding that the central bank is “well down on the path of the tightening cycle.”

In a separate press release shortly after the decision, the RBNZ said, “Committee members agreed that monetary conditions needed to continue to tighten further.”

RBNZ Forecasts Recession in 2023

The RBNZ also forecast that the country will tip into recession in 2023.

“Inflation is no one’s friend,” Reserve Bank Governor Adrian Orr said in a press conference after the rate hike announcement. “In order to rid the country of inflation we need to reduce spending levels.”

In its monetary statement, the Reserve Bank was also forecasting a recession in 2023, stretching into 2024.

Orr said the bank was predicting a “shallow recession”, with GDP down roughly half a percentage point in the second quarter of 2023, and down around another 0.3 following on from there.

Rate Hike Source of Stress for Homeowners

The latest rate hike is likely to cause major concerns among New Zealand’s highly leveraged homeowners, many of whom are scheduled to refinance their mortgages at far higher interest rates than they had been paying, and have no short-term relief in sight.

For a look at all of today’s economic events, check out our economic calendar.

Investors Shedding Risky NASDAQ Composite Growth Companies for Traditionally Defensive Firms

The major U.S. stock index futures contracts are drifting higher during the premarket session, leading to calls for early strength in the cash market. Volume is below average as many of the major players – pensions, mutual funds and hedge funds – have moved to the sidelines ahead of Wednesday’s Fed minutes and Thursday’s Thanksgiving holiday.

Investors are primarily reacting to worries surrounding the stricter COVID-19 restrictions in China as their focus shifts to slower world growth. This news is helping to put a lid on prices, while surprisingly less-hawkish chatter from a Fed official is providing some support.

At 13:45 GMT, blue chip Dow Jones Industrial Average futures are trading 33854.00, up 119.00 or +0.35%. The benchmark S&P 500 Index is at 3973.00, up 15.00 or +0.38% and the tech-weighted NASDAQ Composite is trading 11621.00, up 33.00 or +0.28%.

Investors Adjusting Investing Strategies in Reaction to China’s COVID Curbs

China strengthened its fight against COVID-19 with Beijing shutting parks, malls and museums while other cities resumed mass testing, amid concerns about the economy and fading hopes of a quick reopening.

China also reported its first deaths in the mainland from COVID since May over the weekend. The news prompted fears among investors that the country could bring back restrictions meant to slow the virus’s spread, which would hurt business.

Investors are also saying that the COVID news is forcing money managers to make adjustments to their portfolios. Analysis of Monday’s trading activity showed investors were moving away from growth stocks and toward defensive sectors like health care and utilities.

Investors Eyeing Fed Speakers for Clues About Interest Rates

On Tuesday, several Federal Reserve officials are set to speak, including Kansas City Fed President Esther George and St. Louis Fed President James Bullard. On Wednesday, the minutes from the Fed’s November meeting could offer more clarity on the Fed’s monetary tightening path.

Cleveland Federal Reserve President Loretta Mester said Monday inflation will need to show more signs of progress before she’s ready to stop advocating for interest rate increases.

While Mester, a voting member of the rate-setting panel supported a smaller rate hike in December, San Francisco Fed President Mary Daily stressed on Monday the need to be careful to avoid a “painful downturn”.

Daily NASDAQ Composite Index

Daily Forecast

Thin trading conditions could lead to extreme moves and excessive volatility on Tuesday with St. Louis Fed President James Bullard possibility providing the catalyst for the move.

Last week, the hawkish Bullard drove stock prices lower after he said the Fed’s target policy needs to rise to at least a range between 5.00% and 5.25% from the current level of just below 4.00% to be “sufficiently restrictive” to curb inflation.

We’re looking for more of the same if Bullard reiterates his bullish stance.

For a look at all of today’s economic events, check out our economic calendar.

Bob Iger Back in Charge as Disney CEO; Shares Jump 9%

Disney shares are bucking the early negative trend in the U.S. stock market on Monday rising more than 9% after the media giant announced that Bob Iger would return as CEO, effective immediately.

The move was announced late Sunday after Iger’s hand-picked successor as CEO, Bob Chapek, came under fire for his management of the entertainment giant.

Iger Back at the Helm at Disney

“It is with an incredible sense of gratitude and humility – and, I must admit, a bit of amazement – that I write to you this evening with the news that I am returning to The Walt Disney Company as Chief Executive Officer, Iger wrote to employees in an email, which was obtained by CNBC.

Iger has signed on to work as CEO for two years, Disney said Sunday, “with a mandate from the Board to set the strategic direction for renewed growth and to work closely with the Board in developing a successor to lead the Company at the completion of his term.”

How Iger Got His Former Job Back

The wheels for Iger’s return were likely set in motion on November 8 when Disney fell short of expectations for profit and key revenue segments during the fiscal quarter and warned strong streaming growth for its Disney+ platform may taper going forward.

After that announcement, shares of the company fell roughly 8%.

The company’s quarterly results missed Wall Street expectations on the top and bottom lines, as both its parks and media divisions underperformed estimates.

At the same time, Chief Financial Officer Christine McCarthy tempered investor expectations for the new fiscal year, forecasting revenue growth of less than 10%. The company reported 2022 fiscal revenue growth of 22%.

Fourth-quarter revenue in the media and entertainment division fell 3% year over year to $12.7 billion during the year-earlier period, as the company’s direct-to-consumer and theatrical business struggled. Analysts has expected segment revenue of $13.9 billion, according to StreetAccount estimates.

Disney+ growth is expected to slow in the fiscal first quarter, Disney executives warned in a conference call.

For a look at all of today’s economic events, check out our economic calendar.

US Mortgage Rates Slump in Response to CPI Numbers and Fed Pivot Bets

In the week ending November 17, mortgage rates fell for the third time in seven weeks. 30-year fixed mortgage rates tumbled by 47 basis points to 6.61%. In the week prior, 30-year fixed rates increase by 13 basis points to 7.08%.

Following the latest slide, rates are up 162 basis points from the August 3 most recent low of 4.99%. 30-year fixed rates were up 351 basis points year-over-year.

Economic Data from the Week

It was a busier first half of the week on the economic calendar, with US wholesale inflation and retail sales the material stats of the week.

The numbers delivered mixed results. While wholesale inflation figures supported the bets of a Fed pivot in December, retail sales figures impressed, suggesting room for more front-loading.

In October, the wholesale annual inflation rate softened from 8.4% to 8.0%, while retail sales increased by 1.3%, month-on-month.

However, the previous week’s US CPI report sent mortgage rates tumbling. In October, the US annual inflation rate softened from 8.2% to 7.7%, fueling market bets of a December Fed pivot.

In response to the report, the probability of a 75-basis point December rate hike fell to 17.0%. This morning, the likelihood of a 75-basis point December rate hike stood at 24.2%.

Hawkish Fed chatter in the week supported an upswing that could nudge mortgage rates higher in the week ahead. According to the FedWatch Tool, the probability of a 75-basis point rate hike stood at 19.4% one week earlier and 75.4% one month earlier.

Freddie Mac Rates

The weekly average rates for new mortgages, as of November 17, 2022, quoted by Freddie Mac were:

  • 30-year fixed rates tumbled by 47 basis points to 6.61%. This time last year, rates stood at 3.10%.
  • 15-year fixed rates slid by 40 basis points to 5.98%. Rates were up by 359 basis points from 2.39% a year ago.

According to Freddie Mac,

  • Mortgage rates slumped due to inflation figures that suggested US inflation may have peaked.
  • Despite the fall in mortgage rates, the housing market has a bumpy road ahead.
  • Inflation remains elevated, and the Fed will likely keep interest rates at elevated levels to bring inflation to target.
  • Consumers will continue to feel the impact of the inflation and Fed monetary policy environment.

Mortgage Bankers’ Association Rates

For the week ending November 11, 2022, the rates were:

  • Average interest rates for 30-year fixed with conforming loan balances decreased from 7.14% to 6.90%. Points fell from 0.77 to 0.56 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA rose from 6.86% to 6.93%. Points decreased from 1.37 to 0.99 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances increased from 6.50% to 6.51%. Points fell from 0.78 to 0.64 (incl. origination fee) for 80% LTV loans.

Weekly figures released by the Mortgage Bankers Association showed that the Market Composite Index, a measure of mortgage loan application volume, increased 2.7% in the week ending November 11. The Index decreased by 0.1% in the week prior.

The Refinance Index declined by 2% and was 88% lower than the same week one year ago. In the previous week, the Index slid by 4%.

The refinance share of mortgage activity decreased from 28.1% to 27.6%. The refinance share fell from 28.6% to 28.1% in the previous week.

According to the MBA,

  • Mortgage rates decreased on signs of slower inflation, sending Treasury yields lower.
  • The 30-year fixed rate saw the most marked weekly decline since mid-2022.
  • Adjusted application activity increased in response to falling rates.
  • However, the average purchase loan size fell to its smallest amount since 2021, with refinance activity under pressure.

For the week ahead

It is a busy first half of the week on the economic data front. The Wednesday session will provide Treasuries ahead of the Thursday Thanksgiving holiday.

Michigan consumer sentiment, core durable goods, private sector PMIs, and jobless claims will be in focus.

While the stats will influence near term mortgage rates, FOMC member chatter will also need consideration. Following hawkish Fed chatter from last week, more of the same could refuel bets of a 75-basis point Fed rate hike in December. While softer, inflation remains elevated.

With the US unemployment rate at 3.7%, the Fed still has plenty of wriggle room to deliver another 75-basis point hike before taking its foot off the gas. However, disappointing private sector PMIs, a slide in consumer sentiment, and a sharp rise in jobless claims could change the narrative.

USD/CAD Tests Resistance At 1.3400 As WTI Oil Remains Under Strong Pressure

Key Insights

  • The sell-off in oil markets put pressure on the Canadian dollar. 
  • GBP/USD gained upside momentum as UK Retail Sales exceeded expectations. 
  • USD/JPY pulled back as Japan’s Inflation Rate touched new highs. 

USD/CAD Rebounds As WTI Oil Settles Below The Key $80 Level

USD/CAD moved towards the 1.3400 level as the strong sell-off pushed WTI oil towards $78. Today, USD/CAD traders also had a chance to take a look at Producer Prices data from Canada. The reports indicated that PPI increased from 9.1% in September to 10.1% in October, compared to analyst consensus of 7.8%.

USD/CAD

Currently, USD/CAD is trying to settle above the resistance at 1.3400. In case this attempt is successful, it will move towards the 50 EMA at 1.3450. A move above the 50 EMA will open the way to the test of the resistance at 1.3470.

On the support side, the nearest support level for USD/CAD is located at 1.3360. If USD/CAD settles back below this level, it will move towards the next support level, which is located near the recent lows at 1.3300.

Other commodity-related currencies have shown mixed performance today. AUD/USD declined towards 0.6670, while NZD/USD managed to rebound towards the 0.6150 level.

U.S. Dollar Gains Some Ground Ahead Of The Weekend

U.S. dollar is gaining some ground against a broad basket of currencies today as Treasury yields continue to move higher.

Today, traders focused on the Existing Home Sales report for October, which indicated that Existing Home Sales declined by 5.9% on a month-over-month basis. The report is not surprising as high interest rates put significant pressure on the housing market.

EUR/USD Faced Strong Resistance At 1.0400

EUR/USD declined below the 1.0350 level after another unsuccessful attempt to settle above the resistance level at 1.0400.

Government bond yields in the Eurozone continue to move lower, which is a positive development. Back in October, a potential debt crisis was a real risk for the EU.

Meanwhile, traders are focused on general market sentiment towards the U.S. dollar. At this point, it looks that EUR/USD does not have enough catalysts to get above the 1.0400 level in the last trading session of the week.

GBP/USD Tries To Settle Above 1.1900 As Retail Sales Exceed Expectations

GBP/USD is currently trying to settle above the 1.1900 level as traders remain bullish on the pound ahead of the weekend.

Yesterday’s pullback was quickly bought, and it looks that recent economic reports from the UK provided some support to the pound.

Gfk Consumer Confidence improved from -47 in October to -44 in November, compared to analyst consensus of -51. Retail Sales increased by 0.6% month-over-month in October, while analysts expected that they would increase by 0.3%.

USD/JPY Pulls Back As Traders React To Japan’s Inflation Data

USD/JPY moved back below the 140 level as bulls failed to push it above the important resistance at 140.60.

Japan’s inflation reports provided additional support to the yen. Inflation Rate increased from 3% in September to 3.7% in October, while Core Inflation Rate grew from 3% to 3.6%. Both reports exceeded analyst estimates.

For a look at all of today’s economic events, check out our economic calendar.

S&P Opens Higher as Traders Absorb Rate Hike Warnings, Recession Fears

The broad-based S&P 500 Index is trading higher shortly after the cash market opening on Friday. The early price action suggests investors have absorbed the warnings from U.S. Federal Reserve officials on higher interest rates and perhaps indications from the yield curve of a recession.

At 14:34 GMT, the S&P 500 Index is trading 3984.00, up 28.75 or +0.73%.

Fed Pivot Off the Table

Investors are attempting to recover from yesterday’s 0.3% decline amid a rise in U.S. Treasury yields following hawkish comments from St. Louis Fed President James Bullard.

Bullard said interest rates might need to hit a range from 5-5.25% from the current level of just below 4.00% to be “sufficiently restrictive” to curb inflation, according to Reuters.

That was a blow to investors who had been wagering rates would peak at 5% and saw Fed fund futures sell off as markets priced in more chance that rates would now top out at 5-5.25%, rather than 4.75-5.0%.

Bullard’s comments along with the hawkish tone of other Fed heavyweights has essentially taken the so-called “Fed Pivot” off the table.

Treasury Yields Nearly Flat

U.S. Treasury yields are nearly flat on Friday after giving back earlier gains. The price action suggests interest rates are still digesting hawkish comments from Federal Reserve officials a little more than a week after economic data had given investors hope about inflation rising.

The yield on the benchmark 10-year Treasury was up by 3 basis points at around 3.803%. The 2-year Treasury yield rose 4 basis points to 4.495%.

Investors had hoped that recent wholesale and consumer inflation figures, which came in less hot that expected, would prompt the Fed to slow or pause rate hikes.

Stocks sold off earlier this week on concerns that the pace of the Fed rate hikes would lead the U.S. economy into recession.

Strong Consumer Buying Driving Retail Sector Stocks Higher

Retail shares are trading higher as more earnings point to a strong consumer. The SPDR S&P Retail ETF (XRT) is up 2.29% as traders try to post gains for a third straight session.

XRT is down for the week but up 2.8% for the month of November and on pace for back to back month gains, according to CNBC.

Elsewhere in retail, Foot Locker popped 15% in the premarket after earnings came in higher than expected and improving outlook. Ross Stores was up nearly 17% after its quarterly results came in above expectations on the top and bottom lines. Gap gained 8%, CNBC reported.

JPMorgan Upgrades Walgreens

JPMorgan analyst Lisa Gill upgraded Walgreens to overweight from neutral, citing optimism around the company’s shift toward a larger health care operation.

“The company has significantly invested in its transformational consumer-centric healthcare strategy, the centerpiece of which is the launch of Walgreens Healthcare, which looks to provide a better experience for customers, improve outcomes and lower overall healthcare costs,” Gill wrote in a Friday note.

For a look at all of today’s economic events, check out our economic calendar.

U.S. Dollar Rebounds As Bullard Says Fed May Need To Raise Rates By 100 Bps

Key Insights

  • U.S. dollar rebounds after the recent sell-off. 
  • GBP/USD declines after Jeremy Hunt presents a new fiscal plan for the UK. 
  • AUD/USD is under strong pressure amid a broad pullback in commodity markets.

U.S. Dollar Rallies As Bullard’s Comments Show That Fed Remains Hawkish

U.S. Dollar Index rebounded towards the 107 level as traders reacted to hawkish comments from Fed’s Bullard. St. Louis Federal Reserve President Bullard said that the interest rate had not reached the sufficiently restrictive level. According to Bullard, the Fed may need to raise rates by at least another full percentage point.

Traders also focused on the economic data from the U.S. Housing Starts declined by 4.2% month-over-month in October, while Building Permits decreased by 2.4%. High interest rates continue to put pressure on the housing market.

Initial Jobless Claims report indicated that 222,000 Americans filed for unemployment benefits in a week, mostly in line with the analyst consensus. Philadelphia Fed Manufacturing Index declined from -8.7 in October to -19.4 in November.

Treasury yields rebounded after the recent sell-off, providing material support to the U.S. dollar. In case this rebound continues, the U.S. Dollar Index will have a good chance to settle above 107.

EUR/USD Failed To Settle Above 1.0400

EUR/USD pulled back towards 1.0340 as traders continued to take profits after the recent rally.

The final reading of the Euro Area Inflation Rate report indicated that Inflation Rate increased from 9.9% in September to 10.6% in October, compared to analyst consensus of 10.7%.

This minor adjustment does not change the big picture for the Eurozone, which is under significant pressure due to high energy prices.

GBP/USD Retreats As Traders Worry That New Fiscal Measures Would Hurt The Economy

It was a big day for GBP/USD traders as British finance minister Jeremy Hunt presented the new fiscal plan. Valued at 55 billion pounds, the plan includes tax hikes and spending cuts.

The market is worried that the new plan would put too much pressure on the British economy, which is already in recession that is set to continue in 2023.

GBP/USD

Currently, GBP/USD is trying to settle below the support at 1.1790. In case this attempt is successful, it will move towards the next support level at 1.1760. A successful test of the support at 1.1760 will push GBP/USD towards the support at 1.1730.

On the upside, the nearest resistance for GBP/USD is located at 1.1830. If GBP/USD manages to settle back above this level, it will move towards the resistance at 1.1855.

AUD/USD Is Under Strong Pressure

AUD/USD declined towards the 0.6650 level amid a broad sell-off in commodity markets.

Other commodity-related currencies have also found themselves under pressure. NZD/USD settled below the 0.6100 level, while USD/CAD made an attempt to settle above 1.3400.

USD/JPY Gets Back Above The Key 140 Level

USD/JPY settled above the 140 level and is trying to settle above the resistance at 140.60.

The hawkish comments from Fed’s Bullard reminded traders about the huge difference between the policies of BoJ and Fed. In case USD/JPY settles above 140.60, it will have a good chance to develop sustainable upside momentum.

For a look at all of today’s economic events, check out our economic calendar.

Gold Price Forecast XAU/USD – Lower on Profit-Taking Ahead of Philly Fed, Housing Starts Reports

Gold futures are under pressure Thursday as U.S. Treasury yields inched higher and the U.S. Dollar recovered slightly from earlier weakness. Some say traders are reacting to U.S. economic data released on Wednesday that dampened hopes of a slowdown in the pace of future interest rate hike.

Volatility is hitting the financial markets shortly before the New York opening. Some of the volatility is being fueled by wild swings in the FedWatch Tool. Early in the session, the rate hike indicator showed an 89.5% chance of a 50 basis point rate hike by the Fed in December. Later, it dropped to 80%. It is currently at 84.4%.

At 11:56 GMT, December Comex gold futures are trading $1768.20, down $7.60 or -0.43%. On Wednesday, the SPDR Gold Shares ETF (GLD) settled at $165.14, down $0.36 or -0.22%.

Release of UK Autumn Statement Rattling Markets

Gold prices dropped to their low of the session shortly after the release of a forecast calling for Britain’s economy to shrink next year. Finance minister Jeremy Hunt is currently outlining how he and Prime Minister Rishi Sunak will raise taxes and cut spending to repair the public finances, despite the grim outlook.

The new forecast is for gross domestic product to contract by 1.4% next year compared with a projection for growth of 1.8% in the previous outlook published in March by the Office for Budget Responsibility (OBR).

Hunt said the OBR judged that Britain – where high inflation is creating a cost-of-living crisis – is already in recession. It is the only Group of Seven nation yet to recover its pre-pandemic size, having previously suffered a decade a near-stagnant income growth.

Hunt had warned of more pain in his budget statement in the days leading up to Thursday’s announcement.

Gold Traders Monitoring US Economic News

Gold prices are showing signs of topping after U.S. data on Wednesday showed U.S. retail sales increased more than expected in October, renewing expectations that the improved economic data could prompt the Federal Reserve to keep hiking rates.

Gains are also being capped by hawkish Fed member comments. On Wednesday, San Francisco Fed President Mary Daly told CNBC it’s reasonable for the Fed to raise its policy rate to a 4.75%-5.25% range by early next year, and that pausing rate hikes is not part of the discussion.

Short-Term Outlook

Currently, gold traders are looking ahead to the release of key data from the manufacturing and housing sectors, which could provide further insights into the state of the U.S. economy.

Traders are awaiting the release of housing start and preliminary building permit figures for October. The sector has been impacted by rising prices of materials and higher mortgage rates.

Gold investors will therefore be looking to the fresh data for hints about how the U.S. economy is faring in light of persistent inflation and high interest rates.

Investors will also be monitoring a series of Fed speaker remarks for clues about the central bank’s policy plans.

The major concern for gold investors will be stronger-than-expected economic data. Hot data could make investors less optimistic about the Fed slowing the pace of its interest rate hikes. This could put pressure on gold prices.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD to Target $1.21 on UK Inflation and BoE Monetary Policy

It is a busy day for the GBP/USD. UK inflation will draw plenty of interest this morning. Following the wage growth and unemployment numbers, today’s figures could force the Bank of England to deliver another sizeable rate hike in December.

Economists forecast the UK annual inflation rate to accelerate from 10.1% to 10.7%.

After today’s stats, the Bank of England will also be in the spotlight. BoE Governor Andrew Bailey, Ben Broadbent, Catherine Mann, and Swati Dhingra will give testimony at the Treasury Select Committee hearing on the November Monetary Policy Report (1415 BST).

References to Tuesday’s wage growth, today’s inflation figures, and the Bank’s plans to bring inflation to target will influence. The BoE delivered a grim economic outlook, which may also face scrutiny.

Away from the economic calendar, the UK Government’s Autumn Budget will remain an area of interest. Chancellor Jeremy Hunt will deliver the Autumn Budget on Thursday, the UK Government’s first test. In the lead-up to the announcement, Hunt has continued to warn of ‘difficult announcements.’

GBP/USD Price Action

At the time of writing, the Pound was up 0.03% to $1.18657. A mixed start to the day saw the GBP/USD rise to an early high of $1.18750 before easing back.

GBP/USD finds early support.
GBPUSD 161122 Daily Chart

Technical Indicators

The Pound needs to move through the $1.1877 pivot to target the First Major Resistance Level (R1) at $1.2014 and the Thursday high of $1.20289. In line with or better-than-expected inflation figures would support another breakout session.

In the case of an extended rally, the GBP/USD would likely test resistance at $1.21 but fall short of the Second Major Resistance Level (R2) at $1.2166. The Third Major Resistance Level (R3) sits at $1.2455.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.1725 in play. However, barring a risk off-fueled sell-off, the Pound would likely avoid sub-$1.17 and the Second Major Support Level (S2) at $1.1588.

The Third Major Support Level (S3) sits at $1.1300.

GBP/USD support levels in play.
GBPUSD 161122 1 Hourly Chart

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The GBP/USD sits above the 50-day EMA, currently at $1.16367. The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above S1 ($1.1725) would support a breakout from R1 ($1.2014) to target $1.21. However, a fall through S1 ($1.1725) would bring the 50-day EMA ($1.16367) and S2 ($1.1588) into view. The 200-day EMA sits at $1.14584.

EMAs bullish.
GBPUSD 161122 4-Hourly Chart

The US Session

It is a busier day ahead on the US economic calendar, with retail sales and industrial production due. We expect retail sales numbers for October to have more influence on the dollar and the NASDAQ Composite Index.

With the probability of a 75-basis point December rate hike falling to 14.6%, upbeat consumption numbers and hawkish Fed chatter could shift sentiment. FOMC members Williams, Barr, and Waller will speak later today.

US Mortgage Rates Return to 7% Following the October CPI Report

In the week ending November 10, mortgage rates rose for the tenth time in twelve weeks. 30-year fixed mortgage rates increased by 13 basis points to 7.08%. In the week prior, 30-year fixed rates fell by 13 basis points to 6.95%.

Following the latest increase, rates are up 209 basis points from the August 3 most recent low of 4.99%. 30-year fixed rates were up 410 basis points year-over-year.

Economic Data from the Week

It was a particularly quiet first half of the week on the economic calendar, with no economic indicators influencing US Treasuries and yields.

The lack of stats left the markets to consider Fed pivot bets ahead of Thursday’s heavily anticipated US CPI report.

Ahead of the CPI report, bets of a 75-basis point rate hike were evenly split, allowing the upswing in mortgage rates. Hawkish Fed Chair Powell comments from the week prior resonated.

However, while rates were up in the week, the US CPI report for October will likely sink mortgage rates this week. The US annual inflation rate softened from 8.2% to 7.7% in October. The markets responded strongly to the numbers, with the probability of a December 75-basis point interest rate hike falling from 48% to 17.0%.

Freddie Mac Rates

The weekly average rates for new mortgages, as of November 10, 2022, were quoted by Freddie Mac to be:

  • 30-year fixed rates increased by 13 basis points to 7.08%. This time last year, rates stood at 2.98%. The average fee increased from 0.8 points to 0.9 points.
  • 15-year fixed rates rose by nine basis points to 6.38%. Rates were up by 411 basis points from 2.27% a year ago. The average fee decreased from 1.2 points to 1.0 points.
  • 5-year fixed rates increased by 11 basis points to 6.06%. Rates were up by 353 basis points from 2.53% a year ago. The average fee remained unchanged at 0.2 points.

According to Freddie Mac,

  • The housing market is the most interest-sensitive segment of the US economy.
  • Homebuyers continue to face the impact of rates as home sales slide at the year-end.
  • Freddie Mac does not see housing market conditions improving before the end of the year.

Mortgage Bankers’ Association Rates

For the week ending November 4, 2022, the rates were:

  • Average interest rates for 30-year fixed with conforming loan balances increased from 7.06% to 7.14%. Points rose from 0.73 to 0.77 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA rose from 6.70% to 6.86%. Points increased from 1.18 to 1.37 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 6.55% to 6.50%. Points rose from 0.70 to 0.78 (incl. origination fee) for 80% LTV loans.

Weekly figures released by the Mortgage Bankers Association showed that the Market Composite Index, a measure of mortgage loan application volume, decreased by 0.1% in the week ending November 4. The Index increased by 1% in the week prior.

The Refinance Index fell by 4% and was 87% lower than the same week one year ago. In the previous week, the Index increased by 0.2%.

The refinance share of mortgage activity declined from 28.6% to 28.1%. The refinance share increased from 28.2% to 28.6% in the previous week.

According to the MBA,

  • Mortgage rates increased in response to the Fed rate hike to tackle inflation.
  • The 30-year fixed rate remained above seven percent for the third consecutive week.
  • Purchase applications rose for the first time in seven weeks but remained close to 2015 lows.
  • Higher rates and economic uncertainty left prospective homebuyers on the sidelines.

For the week ahead

It is a quiet start to the week on the economic data front. On Tuesday, wholesale inflation figures will draw interest ahead of retail sales on Wednesday.

However, following last week’s US CPI report and bets of a December pivot, the numbers are unlikely to offset the effects of the CPI report on yields and mortgage rates.

In contrast, FOMC member chatter could shift sentiment. While the markets have bet on a Fed pivot, inflation remains elevated. With an unemployment rate of 3.7% and better-than-expected economic growth in Q3, the hawks may talk up the need for another 75-basis point hike before taking the foot off the gas.

FOMC members Waller, Brainard, Cook, Barr, and Williams speak this week.

U.S. Dollar Retreats As Consumer Sentiment Dips To Multi-Month Lows

Key Insights

  • Weak Consumer Sentiment report put additional pressure on the U.S. dollar. 
  • AUD/USD moved towards the 0.6700 level as commodity markets continued to rebound. 
  • GBP/USD made an attempt to settle above 1.1800.

U.S. Dollar Remains Under Strong Pressure

The American currency has found itself under significant pressure after yesterday’s inflation reports and comments from Fed members.

Currently, the U.S. Dollar Index continues its attempts to settle below the 107 level as traders react to the Michigan Consumer Sentiment report, which indicated that Consumer Sentiment declined from 59.9 in October to 54.7 in November.

The weak Consumer Sentiment report may put additional pressure on the U.S. dollar. Slower consumer activity leads to lower inflation, so the Fed could be less hawkish.

EUR/USD Tests Resistance At 1.0325

EUR/USD has recently made an attempt to settle above the 1.0325 level as the strong rebound continued. Traders ignore recession forecasts and focus on the general weakness of the American currency.

EUR/USD

EUR/USD managed to get above 1.0300 and is trying to settle above the resistance level at 1.0325. In case this attempt is successful, EUR/USD will move towards the resistance at 1.0360. A successful test of this level will push EUR/USD towards the resistance at 1.0400.

On the support side, a move below 1.0300 will open the way to the test of the support at 1.0275. If EUR/USD declines below this level, it will head towards the next support at 1.0250.

GBP/USD Tries To Get Above The 1.1800 Level

GBP/USD made an attempt to setle above the 1.1800 level but lost momentum and pulled back below 1.1750.

Today, traders focused on the economic data from the UK. The third-quarter GDP Growth Rate report indicated that GDP declined by 0.2% on a quarter-over-quarter basis, compared to analyst consensus of -0.5%.

Manufacturing Production declined by 5.8% year-over-year in September, while Industrial Production fell by 3.1%. Both reports exceeded analyst expectations. In the near term, traders will likely stay focused on the general dynamics of the U.S. dollar, which remains under pressure after the release of U.S inflation data.

AUD/USD Continues To Rebound As Commodity Markets Stay Strong

AUD/USD moved to new highs near the 0.6700 level as commodity markets continued to rebound. NZD/USD rallied towards the 0.6100 level.

Meanwhile, USD/CAD settled below 1.3300 and continues to move lower. WTI oil rebounded towards the $90 level as China relaxed its COVID policy, so the Canadian dollar may get more support in today’s trading session.

USD/JPY Fell Below The Key 140 Level

USD/JPY managed to settle below the 140 level and made an attempt to settle below 138.75.

The Japanese yen continues to gain ground against the U.S. dollar as unfortunate short-sellers are forced to buy the yen to get out of their positions.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Hits Day High on Better-Than-Expected Q3 UK GDP Numbers

After a quiet week on the UK economic calendar, the UK GDP report drew plenty of attention this morning.

A lack of stats ahead of today’s numbers left the GBP/USD primed for a big move after Thursday’s US inflation-fueled 3.17% rally to wrap up the day at $1.17147.

According to the ONS, the UK economy contracted by 0.2% in Q3 reversing the growth of 0.2% in Q2. Economists forecast a contraction of 0.5%.

  • Services, production, and construction industries saw slower output in the quarter.
  • Output in the production sector fell by 1.5% in Q3, a fifth consecutive quarterly fall, with services output ending the quarter flat. In the previous quarter, services output rose by 0.2%.
  • Real household expenditure fell by 0.5%.
  • In the monthly estimate, the economy contracted by 0.6%, with the UK bank holiday for the State Funeral of Her Majesty Queen Elizabeth II affecting the monthly figure.

When considering the impact of inflation on the UK economy, the implied GDP deflator rose by 1.2% in Q3 2022. Higher price pressure for household consumption (2.3%) pushed the deflator higher. Compared with the same quarter a year ago, the implied GDP deflator increased by 5.8%, driven by a 9.2% rise in the price of household consumption.

Year-over-year, the economy grew by 2.4% versus 4.4% in Q2. Economists forecast year-over-year growth of 2.1%.

Other positives included better-than-expected industrial and manufacturing production and trade data. Notably, manufacturing production was flat in September after falling by 1.1% in August. Economists forecast a 0.4% decline.

The GBP/USD responded favorably to the stats, rising from $1.17087 to a post-stat and a day high of $1.17346 before easing back.

GBP/USD responds to Q3 GDP report.
111122 GBPUSD Hourly Chart

While the stats were better than expected, the BoE’s grim outlook and the UK Government’s Autumn budget remain considerations over the near term.

At the time of writing, the GBP/USD was up 0.10% to $1.17276.

GBP/USD reverses early losses.
111122 GBPUSD Daily Chart

The Bank of England Staged the Set Ahead of Today’s GDP Report

Last week, the Bank of England delivered a grim outlook of the economy while lifting rates by 75 basis points. The Bank of England forecasts the UK economy to contract in five out of six quarters if the Bank stands pat on interest rates. Significantly, the Bank also warned that the UK economy is facing its lengthiest recession on record.

However, following the BoE rate hike and forecasts, BoE Chief Economist Huw Pill warned of more rate hikes to tackle inflation, stating that,

“Our target is ultimately not on the real economy. Our target necessarily, because we’re running monetary policy, is to contain inflation.”

The Bank of England and the Bank’s Chief Economist set the stage for today’s numbers.

Following today’s stats, investors will turn their attention to Bank of England Monetary Policy Committee member (MPC) commentary to gauge what lies ahead.

MPC members Jonathan Haskel and Silvana Tenreyro are due to speak after today’s report. Comments on the GDP report and monetary policy would also move the dial.

 

GBP/USD and a Run at $1.20 Hinged on the UK GDP Report and the BoE

It is a busy day for the GBP/USD. According to the economic calendar, UK GDP, industrial and manufacturing production, and trade data will be in the spotlight.

After a lack of stats throughout the week, today’s numbers will draw plenty of attention.

Economists forecast the UK economy to contract by 0.5% in Q3 and manufacturing production to fall by a further 0.4%. Weaker-than-expected numbers should see the GBP/USD cough up some of Thursday’s gains.

Uncertainty over the Bank of England’s next move lingers despite the Chief Economist’s calls for more to tame inflation. A sizeable contraction would likely ease bets of another aggressive rate hike as Fed pivot bets rise following the US CPI report on Thursday.

Monetary Policy Committee members Jonathan Haskel and Silvana Tenreyro are due to speak after today’s report. Comments on the GDP report and monetary policy would also move the dial.

GBP/USD Price Action

At the time of writing, the Pound was down 0.06% to $1.17080. A mixed start to the day saw the GBP/USD rise to an early high of $1.17155 before falling to a low of $1.17014.

GBP/USD holds onto $1.17.
GBPUSD 111122 Daily Chart

Technical Indicators

The Pound needs to avoid the $1.1597 pivot to target the First Major Resistance Level (R1) at $1.849. A breakout from Thursday’s high of $1.17312 will likely hinge on market risk sentiment and today’s GDP report. Better-than-expected numbers would support a return to $1.18.

In the case of an extended rally, the GBP/USD would likely test the Second Major Resistance Level (R2) at $1.1983 and resistance at $1.20. The Third Major Resistance Level (R3) sits at $1.2368. The UK economy would need to avoid a contraction to bring $1.20 into view.

A fall through the pivot would bring the First Major Support Level (S1) at $1.1463 into play. However, barring a UK GDP report-fueled sell-off, the Pound would likely avoid sub-$1.1350 and the Second Major Support Level (S2) at $1.1212.

The Third Major Support Level (S3) sits at $1.0826.

GBP/USD resistance levels in play.
GBPUSD 111122 1 Hour Chart

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The GBP/USD sits above the 50-day EMA, currently at $1.14574. The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above S1 ($1.1463) and the 50-day EMA ($1.14575) would support a breakout from R1 ($1.1849) to target R2 ($1.1983) and $1.20. However, a fall through S1 ($1.1463) and the 50-day ($1.14574) would bring the 100-day ($1.14140) and the 200-day ($1.13911) EMAs into view.

EMAs bullish.
GBPUSD 111122 4-Hourly Chart

The US Session

It is a quieter day ahead on the US economic calendar. Michigan State Consumer Sentiment numbers will be in focus.

There would need to be a marked improvement in consumer sentiment to move the dial following the US CPI report. Economists forecast the Consumer Sentiment Index to slip from 59.9 to 59.5. Softer numbers would support the Fed pivot bets.

This morning, the probability of a December 75-basis point rate hike stood at 17.0% versus 48.0% one week ago. Barring hawkish FOMC member chatter, bets of a Fed December pivot should remain firm today.

According to the economic calendar, no FOMC members are due to speak today, leaving the markets to monitor chatter with the media.

U.S. Dollar Falls As Inflation Declines To 7.7%

Key Insights

  • U.S. dollar is losing ground as traders rushed to buy riskier currencies after the release of U.S. inflation reports. 
  • GBP/USD managed to settle above 1.1650.
  • AUD/USD and NZD/USD gained ground amid a broad rally in commodity markets. 

U.S. Dollar Is In Free Fall After Inflation Reports

U.S. dollar found itself under significant pressure after the U.S. released inflation data for October. Inflation Rate declined from 8.2% in September to 7.7% in October, compared to analyst consensus of 8%. Core Inflation Rate declined from 6.6% to 6.3%.

Meanwhile, Initial Jobless Claims report indicated that 225,000 Americans filed for unemployment benefits in a week. This report had no impact on currency dynamics as traders focused on inflation data.

The yield of 2-year Treasuries declined towards 4.35%, while the yield of 10-year Treasuries settled below 3.90% as traders bet that the Fed would raise rates less aggressively.

The U.S. Dollar Index moved from 110.70 to 108.60 after the release of inflation data as traders rushed to buy riskier currencies.

EUR/USD Tries To Settle Above 1.0150

EUR/USD moved towards 1.0150 after the release of the U.S. inflation data. The U.S. data was the most important economic report of the week, and other catalysts would not be in play today.

EUR/USD

Currently, EUR/USD is trying to settle above the resistance at 1.0150. In case this attempt is successful, EUR/USD will move towards the next resistance level at 1.0190. A successful test of this level will push EUR/USD towards the resistance at 1.0220.

On the support side, a move below 1.0150 will push EUR/USD towards the support at 1.0115. If EUR/USD declines below this level, it will head towards the next support at 1.0090.

GBP/USD Is Up By More Than 2.5%

GBP/USD gained strong upside momentum and moved towards the 1.1650 level. The potential shift in Fed’s policy is especially bullish for GBP/USD as the Bank of England will not be able to continue raising rates at a fast pace due to the problems of the UK economy.

In case GBP/USD manages to settle above the 1.1650 level, it will head towards the resistance at 1.1710.

AUD/USD Settled Above 0.6550 As Commodity Markets Rallied

AUD/USD moved above the 0.6550 level amid a strong rally in commodity markets.

Other commodity-related currencies have also enjoyed strong support today. NZD/USD is currently trying to settle above the psychologically important 0.6000 level. USD/CAD pulled back towards 1.3350.

It should be noted that the Canadian dollar has less support as it is more sensitive to the dynamics of oil prices, which are mostly flat in today’s trading session.

USD/JPY Is Under Strong Pressure

USD/JPY declined below the 142 level as traders rushed to buy the yen after the release of U.S. inflation data.

Traders who bet on a rebound from the 145.50 level have found themselves in an uncomfortable situation, and the current move looks like a major short squeeze for those who bet on the weakness of the Japanese currency.

For a look at all of today’s economic events, check out our economic calendar.