हर दिन बाजार विश्लेषण

The big risk event this week has seen US price pressures slow as re-opening hotspots ease. The headline rose 0.3% m/m which was one-tenth below the 0.4% estimate, while the core rose a mere 0.1% with analysts forecasting a 0.3% rise. The y/y rates also moderated, to 5.3% from 5.4% for the headline and 4% form 4.3% in the core.

Used car prices – one of the now well-known drivers of higher prices – fell 1.5% which was the largest drop since November 2016 and ended a series of five straight monthly increases. The biggest rises were in energy and food prices which may hit consumer spending going forward.

But many analysts believe prices will remain elevated and sticky. Firms are finding it easier to raise prices, supply bottlenecks are still apparent and housing costs may be the next big driver of higher costs. Bloomberg noted this week that consensus estimates for inflation through Q2-2022 have risen in each of their last three monthly surveys. Wage pressures are also potentially rising now as the demand for workers is outstripping supply.

All eyes will be on the Fed’s updated dot plot which we will see at next week’s critical FOMC meeting.

USD unmoved on softer data

King dollar did move lower after the inflation numbers but regained its poise to close at marginally higher on the DXY. The index is currently trading around the 50-day moving average with long upper and lower shadows on a series of candles over the last few sessions signalling a sense of indirection.

Prices will need to move either above 92.89 or below 92.32 to break out of the current indecision. The markets could be in wait-and-see mode until next week.

Chinese data disappoints

We had a raft of data out of China overnight, which showed that businesses are still grappling with localised lockdowns, supply bottlenecks and high raw material costs. Retail sales grew at the slowest pace since August 2020 and industrial output rose at a weaker pace from July.

The S&P500 is now approaching its trusty 50-day moving average which has acted as firm support on numerous occasions since the pandemic crisis began. Prices have rarely dropped below this indicator for more than a couple of sessions. Similarly, the index hasn’t closed below the 21- day moving average for three days in a row since the mid-May correction.

UK inflation surges, strong UK jobs support GBP

UK CPI jumped up to 3.2% from 2.0% seen in July primarily due to base effects. Supply constraints also added to the mix, but both these factors are set to ease in the medium term as the reopening of the economy sees a move to services from goods. Yesterday’s UK unemployment held steady at 4.6% as the data gave us a glimpse of how the labour market will react to the tapering of the furlough scheme.

GBP moved higher yesterday beyond 1.39 and up to the 100-day moving average. But dollar strength kicked in and pushed prices back near to the 200-day SMA support at 1.3824.

We get US retail sales out tomorrow with Delta variant concerns potentially weighing on sales and the impact of stimulus checks fading.

अस्वीकरण: इस लेख के कंटेंट में व्यक्तिगत राय शामिल हैं तथा इसे व्यक्तिगत रूप से तथा/या अन्य निवेश सलाह तथा/या एक प्रस्ताव तथा/या वित्तीय साधनों में किसी लेन-देन लोभ तथा/या गारंटी तथा/या भविष्य के प्रदर्शन की भविष्यवाणी के रूप में नहीं लिया जाना चाहिए। ForexTime (FXTM) व उसके एफिलिएट, एजेंट, निर्देशक, अधिकारी या कर्मचारी उपलब्ध कराई गई किसी भी जानकारी या डेटा की परिशुद्धता, वैधता, समयबद्धता या संपूर्णता की गारंटी नहीं लेते हैं तथा उसी के आधार पर किसी भी निवेश से उत्पन्न होने वाले नुकसान के लिए दायित्व ग्रहण नहीं करते हैं।

This week there will be headline inflation readings, also known as the consumer price index (CPI), released for three major Western economies:

• Tuesday, Sept 14: US August CPI expected to grow 5.3% compared to August 2020 (year-on-year, y/y) and 0.4% month-on-month (m/m).
   
• Wednesday, Sept 15: UK August CPI forecasted to grow 2.9% y/y and 0.5% m/m.
   
• Friday, Sept 17: The final readings of the Eurozone’s CPI is expected to confirm the estimated 3% y/y and 0.4% m/m prints. (The initial figures had been released on 31 August).

Why do central banks focus on inflation?

Part of the mandate for many major central banks is to keep inflation in check to help their respective economies.

Out-of-control inflation could hurt consumers, with lower demand potentially resulting in less hiring as well.

And thanks to the trillions that central banks have pumped out into their respective financial systems since the pandemic, headline inflation has been surging higher in these major economies!

• In the US, the headline CPI came in at 5.4% in June and July, which are the highest y/y CPI readings since 2008.
   
• In the Eurozone, the estimated 3% y/y CPI reading for August would be its highest in a decade (since 2011). In Germany, the EU’s largest economy, prices last month rose by 3.4% y/y - the most since 2008.
   
• For the UK, the forecasted August CPI y/y reading of 2.9% would be its highest since 2017.

Failure to act in a timely manner and curb such inflationary pressures could in turn derail the economic recoveries.

The inflation debate

Yet, central bankers have differing views as to whether these elevated inflation prints are here to stay.

Fed Chair Jerome Powell has long maintained that the inflationary surges of late will be ‘transitory’, or temporary. Likewise, Powell’s counterpart at the European Central Bank, President Christine Lagarde, shares the same view. They think the supply bottlenecks that have contributed to higher inflation would eventually be sorted out, prompting prices to moderate.

However, the likes of Dutch central bank President Klaas Knot and the Austrian central bank Governor Robert Holzmann believe that the higher inflation could stick around for longer. That suggests that the ECB should already start thinking about how to intervene, specifically by way of easing up on its emergency asset purchases (also known as the Pandemic Emergency Purchase Programme or PEPP).

Across the Atlantic, Federal Reserve Bank of Philadelphia President Patrick Harker reportedly just this week voiced his support for a ‘sooner rather than later’ tapering. Similar sentiment has been expressed by Dallas Fed President Robert Kaplan, St. Louis Fed President James Bullard, and Kansas City Fed President Esther George.

And the debate is not confined to just among policymakers, but also playing out across global financial markets as well.

Why markets care what central banks think about inflation?

The inflation outlook is a crucial consideration for the timing of policy moves by central banks.

Overall, should these central banks start unwinding their respective stimulus measures, that should trigger profit-taking in stock markets while spurring their own currency higher.

Note how the benchmark dollar index (DXY), which measures the greenback’s performance against other major G10 currencies, has been lifted onto a higher plane since the Fed started talking about its own tapering plans.

Conversely, because the ECB is seen lagging behind the Fed in the path towards normalizing policy closer towards pre-pandemic levels, the euro has been subdued and has been finding it hard to breach the 1.19 mark against the US dollar of late.

When comparing how close the ECB’s is to a rate hike versus their counterparts at the Bank of England, with the latter closer to it than the former, that explains in part why EURGBP has been returned back below its 50-day simple moving average (SMA).

And although markets are forecasting that the Bank of England’s rate hike would happen sooner than the Fed’s (81% chance of a rate hike by the Bank of England in May 2022, compared to a 77% chance of a Fed rate hike in December 2022), GBPUSD has been confined between a wide range of 1.35-1.40 so far this quarter. This sideways pattern is confirmed by the convergence of its shorter- and longer-term moving averages.

Still, Sterling remains the best-performing G10 currency vs. the US dollar so far this year, with GBPUSD boasting of a 1.24% year-to-date gain. The Pound has also strengthened against all of its G10 peers so far this year.

Overall, should the CPI releases for the US, UK, or the Eurozone over the coming days come in higher-than-expected, that could persuade the respective central banks to move closer to adjusting its own policy settings.

The closer each central bank is perceived to be normalizing policy, that could spur that particular currency higher, be it the US dollar, the British Pound, or the euro.

अस्वीकरण: इस लेख के कंटेंट में व्यक्तिगत राय शामिल हैं तथा इसे व्यक्तिगत रूप से तथा/या अन्य निवेश सलाह तथा/या एक प्रस्ताव तथा/या वित्तीय साधनों में किसी लेन-देन लोभ तथा/या गारंटी तथा/या भविष्य के प्रदर्शन की भविष्यवाणी के रूप में नहीं लिया जाना चाहिए। ForexTime (FXTM) व उसके एफिलिएट, एजेंट, निर्देशक, अधिकारी या कर्मचारी उपलब्ध कराई गई किसी भी जानकारी या डेटा की परिशुद्धता, वैधता, समयबद्धता या संपूर्णता की गारंटी नहीं लेते हैं तथा उसी के आधार पर किसी भी निवेश से उत्पन्न होने वाले नुकसान के लिए दायित्व ग्रहण नहीं करते हैं।

Here are the key scheduled events that could move financial markets this week:

Monday, September 13

• Brent: OPEC Monthly Oil Market Report

Tuesday, September 14

• AUD: RBA Governor Philip Lowe speech
• JPY: Japan July industrial production (final print)
• GBP: UK July unemployment, August jobless claims
• USD: US August consumer price index
• Apple product event

Wednesday, September 15

• CNH: China August retail sales, industrial production
• GBP: UK August consumer price index
• EUR: Eurozone July industrial production
• USD: US August industrial production
• US crude: EIA crude oil inventory report
• EUR: ECB Chief Economist Philip Lane speech

Thursday, September 16

• NZD: New Zealand 2Q GDP
• JPY: Japan August external trade
• AUD: Australia August unemployment
• EUR: ECB Governing Council member Olli Rehn speech
• USD: US weekly initial jobless claims, August retail sales

Friday, September 17

• EUR: Eurozone August consumer price index (final print)
• US stocks: Quarterly witching day
• USD: US September consumer sentiment

On Monday morning, oil prices are picking up from where they left off before the weekend, powering hard this past Friday to erase losses from earlier in the week. Oil benchmarks registered a third consecutive weekly advance, with Brent now attempting to break out of the bearish channel it had adhered to since July.

And there could be more catalysts ahead for oil markets in the coming days.

Oil market participants and watchers would be gleaning clues from the OPEC monthly report due today about where oil prices should be headed next. Given that the group controls about 40% of global crude supply, what OPEC says carries great significance.

Meanwhile, on the demand side, China’s mid-week release of August retail sales and industrial production data is also crucial due to the fact that China is the world’s second largest economy and also the world’s largest importer of the commodity. The health of its economy has important bearings on the state of global demand for oil.

Should either the OPEC report or China’s figures point to a solid global economic recovery, despite concerns over the spread of the Delta variant around the world, that could help push oil even higher.

At the time of writing, US crude has broken back above its 50-day simple moving average (SMA), which is a key technical indicator. A solid close for the day above that psychologically-important $70/bbl mark, coupled with strong bullish signs out of either the OPEC report or China’s economic data, could encourage crude oil bulls to carve a path towards the $73.87 resistance level.

Central bank tapering still a major driver

And of course, the debate about when major central banks will start easing back on their respective bond purchases continues to be a major theme across global markets.

This week, euro traders will be eyeing the scheduled speeches by key ECB officials and their thoughts on the central bank’s next policy move, after it decided to “recalibrate” its bond purchases last week.

ECB Christine Lagarde told euro bulls to wait until December, but traders may not have as much patience and would be raring to go if either ECB Chief Economist Philip Lane or ECB Governing Council member Olli Rehn offers any major policy clues in their respective speeches this week.

Meanwhile, although Fed officials are in a blackout period ahead of the FOMC meeting on September 21-22, market participants worldwide will be paying close attention to headline US inflation print.

Should the consumer price index point to stubbornly high inflationary pressures in the world’s largest economy, that could ramp up market expectations that the Federal Reserve would have to move sooner rather than later to rein in their asset purchases that have supported the economy since the pandemic. Failure to act on time could lead to uncontrollable inflationary surges that actually hurt the US economic recovery.

If markets think that a higher-than-expected US CPI means that the Fed has to act sooner than later, that could help the US dollar push higher and erase its month-to-date losses.

Hence, the speculation about the ECB and the Fed’s respective tapering timelines is set to have a major say over EURUSD, which can only keep its head above its 50-SMA for the time being while testing the 23.6% Fibonacci line from its May-August retracement for support.

A drastically dovish shift in the eyes of the markets about the ECB’s plans to end the its emergency asset purchases, coupled with a ramping up of expectations for an eventual Fed rate hike, could see the world’s most-traded currency pair testing key support levels around the mid- to low 1.17 regions once more.

अस्वीकरण: इस लेख के कंटेंट में व्यक्तिगत राय शामिल हैं तथा इसे व्यक्तिगत रूप से तथा/या अन्य निवेश सलाह तथा/या एक प्रस्ताव तथा/या वित्तीय साधनों में किसी लेन-देन लोभ तथा/या गारंटी तथा/या भविष्य के प्रदर्शन की भविष्यवाणी के रूप में नहीं लिया जाना चाहिए। ForexTime (FXTM) व उसके एफिलिएट, एजेंट, निर्देशक, अधिकारी या कर्मचारी उपलब्ध कराई गई किसी भी जानकारी या डेटा की परिशुद्धता, वैधता, समयबद्धता या संपूर्णता की गारंटी नहीं लेते हैं तथा उसी के आधार पर किसी भी निवेश से उत्पन्न होने वाले नुकसान के लिए दायित्व ग्रहण नहीं करते हैं।

We have seen a slightly brighter mood emerge overnight across Asia after US stock markets closed lower for a fourth day. Japan again leads the way with the Nikkei hitting a six-month high, while tech stocks are rebounding after being hit recently on the potential for more Chinese regulation. Japan has been the highlight this week as the Suga-succession race hots up and M&A newsflow spurs risk appetite.

News that US President Biden also spoke to his counterpart in China, Xi Jinping for the first time since February has added to the more positive risk tone. The countries have vowed to hold regular communications, although Biden did express his frustration with recent dead-end talks.

ECB looking to December

President Lagarde did pretty much what was expected at yesterday’s ECB meeting. Although not called tapering, the “re-calibration” (slowing the pace of the pandemic bond buying programme) is a very tentative sign that tapering will eventually come.

Officials were cautiously optimistic and raised the staff projections for both growth and inflation. But they also reiterated a pledge to keep the €1.85 trillion programme running until March 2022 or later if needed, signalling they’re not ready to discuss ending the measure just yet. The inflation bump is seen as transitory.

The euro found support at the 50-day moving average and the mid-August high around 1.18 after three straight days of losses. A breach of 1.18 will find modest support in the mid-figure area. Resistance comes in around 1.1850 and then 1.19/10.

UK GDP disappoints

July monthly UK GDP has just been released and showed that growth conditions look to have peaked during the summer months. The m/m reading printed at 0.1% versus 0.6% expected and 1% prior. More sluggish momentum is forecast towards the latter part of this quarter as the UK furlough scheme ends.

Speaking of which, Goldman Sachs believes there could be a messier end to this program that finishes at the end of this month, and this will prompt the Bank of England to delay raising rates. While the money markets are pricing in a rate rise next May, with 28 basis points of increases by the end of next year, the US investment bank don’t see borrowing costs rising until the third quarter of 2023.

GBP/USD pushed high yesterday but is trading around 1.38 and the 200-day moving average. The downtrend at the start of the week looked ominous but bulls will look to push higher above 1.3862 to close the week on a strong note.

अस्वीकरण: इस लेख के कंटेंट में व्यक्तिगत राय शामिल हैं तथा इसे व्यक्तिगत रूप से तथा/या अन्य निवेश सलाह तथा/या एक प्रस्ताव तथा/या वित्तीय साधनों में किसी लेन-देन लोभ तथा/या गारंटी तथा/या भविष्य के प्रदर्शन की भविष्यवाणी के रूप में नहीं लिया जाना चाहिए। ForexTime (FXTM) व उसके एफिलिएट, एजेंट, निर्देशक, अधिकारी या कर्मचारी उपलब्ध कराई गई किसी भी जानकारी या डेटा की परिशुद्धता, वैधता, समयबद्धता या संपूर्णता की गारंटी नहीं लेते हैं तथा उसी के आधार पर किसी भी निवेश से उत्पन्न होने वाले नुकसान के लिए दायित्व ग्रहण नहीं करते हैं।

Main European stock indices lost up to 1% yesterday with the German Dax underperforming and falling nearly 1.5%.

US markets managed to limit losses to around 0.5% with the Nasdaq and small cap Russell 2000 suffering the most. Investors may be bracing for a volatile September, which is seasonally one of the weakest months of the year.

Asian markets are also in the red, partly a result of the threat of a new Chinese regulatory crackdown, with Hong Kong particularly affected due to Tencent and Netease. US futures point to another lower open.

Fedspeak mixed

We had more Fed officials on the wires with NY Fed President William saying he does not think the conditions for tapering have been met yet, although the expectation is still that they will be later this year.

The Fed September meeting had been targeted for an announcement about tapering, but this looks increasingly unlikely.

That said, known-hawk Kaplan stuck to his guns yesterday, believing that the Fed should start reining in asset purchases this month. The blackout period starts this Saturday ahead of the FOMC meeting later in the month.

ECB and PEPP on the radar

There is much speculation that the ECB will kick off its own taper (or “recalibration” as it will probably be known on the continent) of the emergency bond buying programme (PEPP) today. This comes after the hawks on the Governing Council have been raising increasing concerns about pro-inflationary risks, with official CPI figures at multi-year highs.

The market will get to see updated ECB staff economic projections with both growth and inflation forecasts set to be raised.

Key will be the bank’s outlook for inflation next year and in 2023.

With GDP growth hitting peak speed and inflation running above target, a reduction of the PEPP, from €80bn/month to €60bn/month could be on the cards. In this case, the dovish side of the ECB would probably demand higher purchases in the non-emergency programme (APP) to avoid a steep drop in overall bond buying. There are many technicalities to be aware of so EUR/USD may prove choppy, but only if there is any policy change of course.

'Markets Extra' podcast: Will the ECB join the tapering club?

EUR/USD sat on 1.18 support zone

This week has seen three straight daily declines in EUR/USD after a failed test of 1.19 last Friday. Prices are now resting on the 1.18 support zone where the 50-day SMA, mid-August high and the Fib retracement (23.6%) of the May-August fall all reside.

Further ECB disappointment brings into view 1.1750 and below.

On the flip side, an ECB “re-calibration” with an optimistic tone will see buyers come back in. EUR/GBP is an alternative pair to trade, depending on the general risk mood and dollar volatility.

Hawkish noises by Lagarde could see the July high at 0.8670 challenged.

अस्वीकरण: इस लेख के कंटेंट में व्यक्तिगत राय शामिल हैं तथा इसे व्यक्तिगत रूप से तथा/या अन्य निवेश सलाह तथा/या एक प्रस्ताव तथा/या वित्तीय साधनों में किसी लेन-देन लोभ तथा/या गारंटी तथा/या भविष्य के प्रदर्शन की भविष्यवाणी के रूप में नहीं लिया जाना चाहिए। ForexTime (FXTM) व उसके एफिलिएट, एजेंट, निर्देशक, अधिकारी या कर्मचारी उपलब्ध कराई गई किसी भी जानकारी या डेटा की परिशुद्धता, वैधता, समयबद्धता या संपूर्णता की गारंटी नहीं लेते हैं तथा उसी के आधार पर किसी भी निवेश से उत्पन्न होने वाले नुकसान के लिए दायित्व ग्रहण नहीं करते हैं।