JASPER’S MARKET SQUAWK 27-10-2022

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JASPER'S MARKET SQUAWK 27-10-2022

Cable jumps 1.4% higher

The British pound recorded consecutive gains since Rishi Sunak took over UK’s leadership, while the dollar has been under pressure. Despite Jeremy Hunt confirming a delay to the mini-budget to November 17, adding to investor anxiety, markets appeared to shrug the event off, allowing the former hedge-fund manager to draw UK’s economic plan together less hastily.

Key factors for today:

• Cable climbs 1.40% to Sept levels primarily on a weaker dollar despite budget delays


• Gold spikes to a 9-day high intraday, but profit-taking erased half gains to session close


• Euro breaks above parity vs dollar with ECB deciding whether it holds or not


• BOC takes a step back as fears of recession linger. Will Fed be next?


• WTI soars 4% to $89/bbl amidst record US exports as SPR releases continue

Pound spikes to Sept highs despite fiscal uncertainty

After speculation following the election of a new UK PM, Chancellor Hunt finally confirmed that the anticipated “medium-term fiscal plan” (as opposed to “mini-budget”) would be delayed until mid-November and be upgraded to an Autumn Statement. This pushes clarity around fiscal policy after the BOE decides on interest rates next Thursday.

Luckily for London traders, sterling gained 1.40% after soaring to $1.1630 on the back of a weaker dollar, and the delay appeared to be an opportunity for a breath rather than lingering uncertainty.

Gold hits 9-day high before giving up half of gains

The dollar weakened once again as bond yields weakened over speculation that the Fed might not be as aggressive as initially anticipated, and key House data continued to disappoint. Gold spiked 1.40% higher during the session for a 9-day high but settled halfway down at $1665/oz.

Central bankers in both US neighbours showed signs of slowing the hiking cycle, and stocks underperformed following worse-than-expected results from big tech companies, including Meta’s dramatic fall.

Euro above parity while ICMA concerns mount up

In a statement ahead of the ECB’s policy meeting, the International Capital Market Association said it was worried about the scarcity of liquid access and excess liquidity in the banking system. It recommended that Europe introduce a reverse repo facility similar to the Fed’s. The situation is expected to be a significant policy point at the forthcoming ECB meeting.

Looking ahead to that, the bank is expected to hike 75bps today. With Euro up 1.20% after a clear breakout above parity, traders will be keen to see whether the bank goes ahead or takes a similar step back as the BOC did to bet on a $1.0000 hold.

WTI soars 4% on day of less-hawkish BOC

The BOC hiked rates by 50bps instead of the 75bps expected. The affinity with the US contributed to speculation that the Fed might make a similar move. Aside from proximity links, the dovishness raises speculation that ECB might take a similar approach being a central bank.

Loonie closed 0.42% lower, with the price of crude ending 4% higher at $89 per barrel, partly supported by the DOE utilization rate. EIA reported an inventory built, but US exports rose to records as the country prepares for further SPR releases.

Movers and shakers

• Visa rose 4.6% following a revenue beat and plans to buy back up to $12.0B in shares. Earnings are supported by forecasting no major recession in the near future


• Boeing fell 8.3% on disappointing earnings, particularly related to defense programs, but cash flow improved


• After the close on Tuesday, Alphabet dropped 9.7% in a continued decline post-earnings report


• Meta crashed 11% after hours due to ad demand headings, and missing expectations

On the docket

• ECB to play key role in Eurodollar outlook as the pair floats above parity


• US GDP growth is expected to rise to 2.4%, a 3% growth from the last data set of -0.6%


• Apple, Amazon, Mastercard, Samsung, Shell, McDonald’s, and T-Mobile expected to report

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