JASPER’S MARKET SQUAWK 14-12-2022

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JASPER'S MARKET SQUAWK 14-12-2022

Dollar basket slumps by 1%

The dollar index lost 1% on Tuesday following softer-than-expected inflation figures in the US. The CPI data has been widely anticipated by market participants just a day before the last FOMC meeting for the year. Yields fell, weakening the dollar initially, but some of the move faded during the day. The dollar slumped towards a 6-month low.

Key factors for today:

• Soft CPI rejuvenates risk appetite as Fed expectations glue at 50bps


• WTI supported by OPEC monthly report as cartel urges production cuts


• 30-year auction demand slowdown implies a less hawkish Fed


• UK’s growth and unemployment situation worst since last July


• RBNZ’s assistant governor sees little impact from hikes

US CPI drives risk appetite

US CPI inflation data came in below expectations, leading to a reevaluation of the Fed’s terminal rate and confirming expectations that the Fed would hike by only 50bps in December, not 75bps. The headline figures slowed from 7.7% to 7.1% on a 7.3% expectation. Notably, core inflation, the Fed’s favourite data set, came in below expectations of 6.1%, too, at 6.0%. Markets welcomed the inflation slowdown, but the focus remains on today’s FOMC.

OPEC Monthly report urges caution, production cuts

On top of a weaker dollar, oil was supported following the release of the OPEC monthly report showing producers cut their outlook for demand and urged further production cuts; it ended 3.10% higher. It has resistance at $76.30/bbl and support at $73.20/bbl. Reports also surfaced that EU states were considering delaying a decision on the gas price cap, again with the price level causing a lack of agreement.

More dollar liquidity issues

Ahead of the Fed’s meeting, the US treasury came to market with a 30-year auction with the lowest number of bidders since 2009. Low market liquidity could be a factor supporting a potential Fed decision to slow down on tightening and risk appetite.

BOE’s stability report adds to pessimism

The report said that the growth outlook and unemployment situation in the UK and globally had deteriorated since the prior report in July. To conduct a first-ever stress-test of non-financial institutions. Cable rose on a weaker dollar and hit a June high of $1.2450. $1.2260 is support.

Kiwi little changed after reaction to US data

RBNZ’s assistant governor Karen Silk has seen little impact from higher rates. He spoke after Adrian Orr, and she forecasted spending to decrease next year while unemployment would rise due to higher labour force participation. Kiwi came off $0.6520 as it was trading higher prior to the CPI report. $0.6375 remains support.

On the docket

• UK inflation CPI


• Fed’s interest rate decision and conference


• EIA crude and natural gas weekly inventory

FX daily performance

• EUR/USD and Cable soared 1.19% and 1.29% higher


• Aussie best performer 1.92% higher, with kiwi following at +1.72%


• USD/CAD and USD/JPY lost 0.73% and 0.75% – respectively


• Gold 1.37% up, oil 3.10% higher

The post JASPER’S MARKET SQUAWK 14-12-2022 appeared first on Key To Markets Blog.

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