2023-11-01 18:10

FOMC INTEREST RATE DECISION KEY POINTS The Federal Reserve stands pat on monetary policy, keeping interest rates unchanged at 5.25%-5.50% for the second straight meeting Forward guidance leaves the door open for further policy firming Gold and the U.S. dollar display limited volatility after the FOMC statement was released as traders await Powell's press conference Most Read: Bank of England Preview - Rates to Stay Put but QT due for Review? The Federal Reverse today concluded its penultimate conclave of the year, voting unanimously to keep the target for its reference interest rate at a 22-year high within the current range of 5.25% to 5.50%. The move was largely in line with recent guidance offered by various central bank officials and Wall Street consensus expectations. The decision to retain the status quo represents a commitment to a data-driven approach. This game plan may buy time to better evaluate the totality of incoming information and properly assess the impact of past actions on the broader economy, taking into account that monetary policy tends to operate with unpredictable and variable lags. To offer some context, the FOMC has increased borrowing costs 11 times since 2022, delivering 525 basis points of cumulative tightening to slow down elevated price pressures that had diminished the purchasing power of most Americans. The strategy has yielded positive results, albeit at a gradual pace, with headline CPI running at 3.7% y-o-y in September after exceeding 9.0% last year. At the last two meetings, however, policymakers have decided to stay put, reflecting their pledge to proceed carefully in the face of growing uncertainties. Several officials have also noted that the bond market has been doing the job for them by tightening financial conditions thorough higher yields, reducing the necessity for an excessively aggressive communication bias. Enhance your trading prowess and seize a competitive edge. Secure your copy of the U.S. dollar’s outlook today for exclusive insights into the key risk factors to consider in the last quarter SEPTEMBER HEADLINE AND CORE US INFLATION CHART Source: BLS FOMC POLICY STATEMENT In its communiqué, the Fed struck a constructive tone on growth, noting that economic activity has expanded at a strong pace in the third quarter, a subtle upgrade from the previous characterization of “moderate”. The positive tone was bolstered by comments on the labor market, which underscored that job gains have moderated but remain strong, and that the unemployment rate has stayed low. On consumer prices, the statement noted that inflation remains elevated and that policymakers will be “highly attentive” towards the associated risks, mirroring comments from last month. Shifting the spotlight to forward guidance, the language remained largely unchanged, with the FOMC indicating that it would consider various factors “in determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time”. Keeping this message unaltered might be a strategic move to preserve maximum flexibility should additional actions become necessary in the future to contain inflation. Immediately after the FOMC announcement crossed the wires, gold prices stayed in negative territory despite the pullback in yields. The U.S. dollar (DXY index), meanwhile, held onto daily gains, but market movements were subdued as traders awaited comments from Jay Powell, who may offer additional clues on the central bank's next steps. US DOLLAR, YIELDS AND GOLD PRICES CHART Source: TradingView Updated at 3:15 pm ET These were some of Powell’s key comments during his press conference that moved markets: - The full effects of past monetary tightening have yet to be felt - The labor market remains tight - Longer-term inflation expectations remain anchored - Restrictive monetary policy is putting downward pressure on economic activity and inflation - The FOMC is not confident enough the stance of monetary policy is sufficiently restrictive to return inflation to 2.0% - The committee has not made a decision about the December meeting - The Fed staff has not put back a recession into the forecast - The committee is not thinking or talking about rate cuts - The question the FOMC is asking is “should we hike more?” - The Fed needs to see below-potential economic growth and softer labor markets to restore price stability - The dot plot is a picture in time, its efficacy decays between meetings - The Fed is close to the end of the cycle - Policymakers are not considering changing pace of balance sheet runoff - Reserves at $3.3 trillion are not even close to scarce at this point - The banking system is quite resilient - The neutral interest rate is unknowable, estimates must be taken with a grain of salt https://www.dailyfx.com/news/forex-fed-stays-put-but-retains-hiking-bias-gold-us-dollar-display-limited-volatility-20231101.html

2023-11-01 16:18

WTI OIL PRICE, CHARTS AND ANALYSIS: WTI Struggling to Hold the High Ground Thanks in Part to a Resurgent US Dollar. Middle East Conflict to Remain a Critical Driver as it Continues to Underpin Oil Prices. EIA Inventories Rose Once More According to the Data. To Learn More About Price Action,Chart PatternsandMoving Averages, Check out theDailyFX Education Series. Most Read: Bitcoin (BTC/USD) Technical Outlook: Golden Cross Pattern Fails to Inspire Higher Prices, What Next? Crude Oil has bounced higher today of the 100-day MA as bears take a pause ahead of a raft of high impact data events and releases. An aggressive bounce leaves the possibility of a bullish engulfing candle close today which would hint at a deeper recovery. EIA INVENTORY DATA AND FED MEETING Oil prices had been up around 2% for the day ahead of the EIA inventories data which showed that stockpiles rose last week. This isn’t a surprise really given that following the summer period US refineries often begin maintenance which curtails production somewhat, however this hasn’t been as steep a drop-off in production as expected. Crude rose by about 62k barrels a day last week according to the EIA data. Source: EIA Last week we heard comments from US authorities about replenishing the SPR which remains at 1980 levels at present. Today the EIA confirmed that the SPR remain unchanged at 351.27 million barrels. The target price based on comments by US authorities will be around the $79 a barrel or less. We came quite close today and it will no doubt be interesting when the US pull the trigger. Authorities have confirmed that they would like this to happen ahead of January 2024. RISK EVENTS FOR THE WEEK AHEAD The FOMC meeting remains key today particularly for the US Dollar and that could spread to the dollar denominated Oil price. Friday will also bring Jobs data from the US with analysts expecting positive data. TECHNICAL OUTLOOK The daily timeframe has seen WTI find support at the 100-day MA around the 81.41 mark before bouncing aggressively in the early part of the European session. However, we have since retreated quite significantly, shedding over 1% of recent gains. The question whether the Bulls are well truly back remains as pressure continues to grow. WTI Crude Oil Daily Chart – November 1, 2023 Source: TradingView Key Levels to Keep an Eye Out For Resistance levels: $82.92 $83.80 $85.00 Key support levels: $81.41 $80.00 $78.15 https://www.dailyfx.com/news/oil-price-forecast-100-day-ma-provides-support-to-wti-but-will-it-last-20231101.html

2023-11-01 14:21

Bank of England Preview Interest rates are expected to remain on hold as price pressures ease BoE may discuss a rethink of their QT process as the ‘term premium’ complicates the selling of longer-dater issuances Markets look to incoming economic data for clues on economic stress, GDP up next UK housing market squeeze and lowest level of mortgage applications since January Inflation and General Price Pressures Drop at a Slow Pace While inflation has been falling in the UK, the level of inflation remains the highest amongst major economies and has proven very stubborn to contain. Bank of England (BoE) officials have been stating throughout most of 2023 that inflation would drop off sizably, however, actual prices have resisted the effects of tighter financial conditions to a large degree. Headline CPI has shown the most progress as oil and gas prices have fallen on average since the Russian invasion of Ukraine. Core inflation (inflation excluding volatile fuel and food prices) has declined at a slower rate than before, revealing widespread price pressures which have take hold. Services inflation – a measure strongly watched by the BoE has actually picked up, adding further to the Bank’s view that rates need to remain restrictive. The Monetary Policy Committee (MPC) will want to see future data heading lower before even considering a change in stance. Source: LSEG Datastream, prepared by Richard Snow UK Job Market Eases but Challenges Appear Along the Way The most recent jobs data showed that UK salary growth had eased but remains uncomfortably high at 8.1% year on year, down from a high of 8.5%. The unemployment rate has been trending higher but August data revealed a move to 4.2% on an adjusted basis. The labour market is easing in a manner that would satisfy the Bank of England that tighter financial conditions are having the desired effect in order to bring down inflation but this becomes a delicate balancing act as rising unemployment risks throwing the economy into recession. While average wages remain elevated the MPC will be motivated to maintain restrictive monetary policy. UK Average Weekly Earnings Source: TradingView, prepared by Richard Snow Quantitative Tightening (QT) May Require a Rethink Rising global bond yields are in part helping to further tighten financial conditions but it is almost impossible to assess its impact in basis points. The ‘term premium’ – a risk premium demanded by the market for keeping money locked up for longer periods of time - will likely entertain a conversation about the current deployment of quantitative tightening by the Bank of England. In September the bank picked up the pace of QT to 100 billion pounds over the next year, up from 80 billion pounds prior. However, a rise in longer dated Gilt yields means that securities are being sold off at a fraction of the cost they were acquired at. Yields and bond prices have an inverse relationship meaning the higher the yield, the lower the price of the security. Therefore, the BoE may decide to consider scaling back on longer-dated sales in favour of a more skewed approach towards shorter durations. Source: LSEG Datastream UK Housing Market Squeezed After booming during the Covid period, the UK housing market has registered lower average prices during 2023 as rising mortgage rates continue to squeeze household budgets, disincentives new finance applications. The longer interest rates are held in restrictive territory, the housing market will have to endure further challenges. UK Nationwide Housing Price Index (YoY) Source: TradingView, prepared by Richard Snow UK mortgage approvals have dropped to levels not seen since the start of the year as lending institutions are having to be more selective in their application process given the increased risk of default. Unemployment is on the rise and interest rates continue to restrict household and consumer spending – making mortgage repayments tougher to manage. Given the rising pressure on the UK economy, the bar for further rate hikes remains high. The Bank of England is therefore more likely to maintain interest rate policy unchanged with the risks of overtightening and not tightening enough appearing more balanced. UK Mortgage Approvals Source: TradingView, prepared by Richard Snow Pound Sterling Struggles for a Bullish Catalyst Cable (GBP/USD) has attempted to lift off its prior low but has struggled to achieve any meaningful follow through. Markets have all but removed any prior support for the pound that previously existed via rising interest rate expectations and the currency is now subject to minor revisions based on incoming data. In such conditions and particularly against the dollar, the pound is at risk of coming under pressure. The US continues to experience surprises to the upside when it comes to economic data, elevating the chances of one more rate hike and further depreciation in the pair. 1.2200 remains the current level of resistance with the swing low of 1.2000 also in play ahead of the announcement with 1.1800 representing a full retracement of the March to July advance. https://www.dailyfx.com/news/bank-of-england-preview-rates-to-stay-put-but-qt-due-for-review-20231101.html

2023-11-01 11:42

Japanese Yen Prices, Charts, and Analysis The USD/JPY line in the sand has been crossed FOMC decision will steer USD/JPY in the short-term The Japanese Yen is less than one point away from trading at its weakest level against the US dollar in over thirty-three years, as the Bank of Japan continues with its ultra-dovish monetary policy. The Japanese central bank was seen intervening in the bond market today as JGB 10-year yields came close to trading at 1%, a level now seen as a reference point for intervention, not a hard ceiling. Japanese Yen Craters after BoJ Fails to Appease Bears, USD/JPY and EUR/JPY Soar USD/JPY 3-Month Chart BOJ intervention According to a recent Bloomberg report, Japanese Prime Minister Fumio Kishida is preparing to announce a 21.8 trillion Yen stimulus package in order to promote growth and cushion inflationary pressures. The Bank of Japan left all policy settings untouched at this week’s central bank meeting apart from tweaking the yield curve control language and ending the daily bond-buying program. This ongoing accommodative policy is leaving the Japanese Yen vulnerable to further losses. The daily USD/JPY chart shows the pair within touching distance of last year’s 151.94 high, a level that prompted the Bank of Japan to intervene. It is unlikely that any official intervention will have the same outcome as last year when USD/JPY dropped by around 24 big figures in three months. Later today we have the latest FOMC decision and any dovish or hawkish rhetoric at the post-decision press conference will likely drive the next move in USD/JPY. Trading the Yen at the moment is a very tricky proposition and it may be best to stay on the sidelines until the outlook becomes clearer. USD/JPY Daily Price Chart – November 1, 2023 What is your view on the Japanese Yen – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1. https://www.dailyfx.com/news/japanese-yen-usd-jpy-nearing-a-33-year-high-on-further-stimulus-talk-20231101.html

2023-11-01 10:00

Article by IG Chief Market Analyst Chris Beauchamp FTSE 100, DAX 40, S&P 500 - Analysis and Charts FTSE 100 clings on above 7330 An attempt to continue Monday’s bounce hit some selling yesterday, helped along by the poor reaction to BP’s results. A close above 7350 would be needed to indicate that the buyers have been able to muster fresh strength, and a close above 7400 might then suggest that a low has been formed. This short-term bullish view would be negated with a close below 7250. This then leaves only the 7200 lows of March and the summer before the index. FTSE 100 Daily Chart See Daily and Weekly FTSE Changes in Sentiment Dax little-changed after two-day bounce Tuesday saw the index develop further bullish strength, albeit from a lower low.Further gains would target 15,000, and from there, trendline resistance from the August peak would be the next target, in a more extended version of the early August rally. For the moment a short-term low has been created, and a reversal below 14,600 would be needed to indicate a renewed bearish view. DAX40 Daily Chart S&P 500 rally slows Continued gains saw the index move back above its Monday highs, as the price rallied from a lower low. The next target is the 200-day SMA, which acted as resistance in late October. A close above this opens the path to trendline resistance from the September highs, and then on to the 50—day SMA, and then the October peak around 4395. Sellers will want a reversal back below 4150 to negate this possible bullish view. S&P 500 Daily Chart https://www.dailyfx.com/news/ftse-100-edges-higher-while-dax-and-s-p-500-struggle-20231101.html

2023-11-01 08:04

EUR/USD ANALYSIS FOMC announcement under the spotlight today. EUR/USD rising wedge breakout could see euro collapse further. EURO FUNDAMENTAL BACKDROP IMPLIED FED FUNDS FUTURES Source: Refinitiv From a euro perspective, recent weak Chinese PMI’s will weigh negatively on the EUR and with bleak growth prospects within the region, the USD is unlikely to lose its attractiveness. In addition, the ongoing geopolitical issues (Israel-Hamas war) will keep the greenback’s safe haven attraction alive. Another key data point to look out for today will be the ISM manufacturing report which includes JOLTs data alongside the ADP release. This information will be key moving forward but should not have much bearing on todays rate decision. Source: Refinitiv TECHNICAL ANALYSIS EUR/USD DAILY CHART Chart prepared by Warren Venketas, IG The daily EUR/USD daily chart above trades within a developing rising wedge/bear flag pattern (black) that may hint at subsequent downside should price breach wedge/flag support. Bulls were unable to push above the 50-day moving average (yellow) and the upcoming Fed catalyst could spark a pattern breakout. The Relative Strength Index (RSI) currently hovers around its midpoint zone thus indicating no preference for bullish nor bearish momentum (hesitancy). Resistance levels: 1.0635/50-day MA 1.0600 Support levels: 1.0500 1.0443 1.0300 IG CLIENT SENTIMENT DATA: BEARISH IGCS shows retail traders are currently neither NET LONG on EUR/USD, with 68% of traders currently holding long positions (as of this writing). https://www.dailyfx.com/news/forex-eur-usd-price-forecast-euro-looks-vulnerable-as-all-eyes-shift-to-fomc-wv-20231101.html