Calendar Week 16-2023
Last week saw US inflation numbers show some signs of weakness, as did retail sales, and so the US dollar was on the back foot most of the week as market bought stocks in a risk on environment. Late Friday though, that picture began to change with Fed speak of inflation not coming off enough or fast enough, so more rate rises to come. Further, a survey showed US consumers inflation expectations spiked higher, which rising oil prices will only contribute to, so Friday quickly became risk off trading. This sent US dollar higher, bond yields higher, stocks weaker along with commodities and commodity currencies also getting sold.
With the FOMC almost two weeks away, soon the Fed members will be in communication lockdown so expect a few more talking heads prior to radio silence.
We expect more rate rises, both from the USA and locally here too. But we are getting closer to the peak. But we are a long way from any rate cuts. When the recession bites is when to expect cuts, as job loses mount. We are not seeing that happening in either economy yet.
Here in Australia, a report (from Dr Stanford at the Australia Institute Centre for Future Work) showed that over 60% of the driving force of inflation is due to corporate greed in raising prices as they continue to record massive profits. The individual consumers are wearing the cost of it, both with higher rents and mortgages as well as higher staples such as energy and food. Seems the peoples government (sic) is not doing much to ease the pressure with the Labour party bought and paid for by these corporates to the tune of $66M at last election.
And when the recession hits here, who will be the ones to suffer? Those on the lower incomes as job losses will hit that sector first as spending on discretionary items dries up. Rant over.
Ahead this week we have UK jobs data, inflation numbers from Canada, UK and NZ. Then a raft of PMIs on Friday.
Currency Guidance
USD – Tagged Feb lows of 100.50 before finding buyers seeking safety in risk off conditions. Would expect this to continue this week and move into the mid 102’s.
AUD – Not known to be so messy, usually trends nicely does the Aussie. However, it has been chopping around 0.67 for 2 months now. I too see no reason to be long AUD but nor am I convinced to be a seller either. Technically I would leave it well alone.
EUR – Pushed through to beat Feb highs and I would expect it to pullback to the low 1.08s for now. Bigger question will be where to after that? Will it bounce and stay on trend or break lower. Hard to tell for now.
GBP – Similar story here, looking for the pullback to 1.2270 area, where it could find buyers, or could break lower. But that is the short term target for now.
JPY – Yen should be a sellers market, when risk is on. However, even though risk is off from Friday, the USD caught most of the safe haven flow, not the Yen. Looks to be back into an uptrend with the 4hr chart cycling along the 50ema nicely.
