JASPER’S MARKET SQUAWK 23-12-2022

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JASPER'S MARKET SQUAWK 23-12-2022

Risk appetite dries up, but Gold plunges

Gold plunged 1.30% on poor sentiment, with markets absorbing a series of negative news, including job cuts, the potential for further tightening and a mixed bag of economic data in the US. The dollar’s uprise also saw Nasdaq plummeting 2.20%, the S&P 500 and DJIA ending the session 1.45% and 1.05% down – respectively, and commodity currencies Aussie and Kiwi end trading closing in the red.

Key factors for today:

• US indices nosedive along with gold on the dollar’s advance


• US data disappoint, with core CPI renewing fears of further rates


• UK’s gdp revision sends growth deeper into contraction


• EBC officials have different opinions about where inflation peaks


• China covid cases see an exponential uptick


• Japanese CPI hits 40-year high

Dollar higher following core inflation print

A series of headlines reversed Wednesday’s risk appetite as investors started to digest the events one at a time. It kicked off with job cuts at Micron. The announcement was followed by November’s Leading Indicator figures coming in below expectations. But core PCE unexpectedly rose higher, increasing fears that more central bank tightening was coming and sending the greenback up. Final Q3 US GDP was revised higher for a change. However, personal consumption also accelerated, leaving participants no choice but to switch trades. DXY rose 0.20%, with significant resistance at 105.00. Whereas 103.75 is support.

UK GDP revised deeper into contraction

UK data contributed to the risk-off move in the markets, with Q3 GDP one decimal further in negative than the preliminary reading. Private consumption was also revised lower, with household incomes falling for four consecutive quarters, while quarterly business investment came in negative for the first time since Q4 2021. Cable slid to a 3-week low of $1.20 but closed the session a tad higher from there, trimming only 0.34% of a bigger intraday loss. $1.22 is resistance above $1.21 in case bullish momentum increases. $1.19, on the other hand, is support.

Mixed commentary from ECB officials

Vice President of the ECB Luis De Guindos, said that 50bps hikes might become the new normal in the near term, saying the bank had no choice but to act on inflation. On the other hand, governing council member Mario Centeno said he saw inflation peaking this quarter, and Yiannis Stournas said he saw rates reaching 3% by the end of March, implying a further 100bps of hikes in the next three months. EUR/USD ended the session mixed, with price action stuck in a 100-pip range with its lower band at $1.0570.

China bracing for covid surge

Headlines from China dominated by an accelerating spread of covid-19 cases. A report circulated that Shanghai Deji hospital expects about half of the city’s 25M inhabitants to get covid by the end of the week. Nikkei, ASX, HSI and Shanghai indices all traded more than 0.60% down in early GMT Friday.

Japan inflation highest in 40 years

Overnight, Japan released its CPI figures. It came in a little less hot than expected YoY but hit a multi-decade high. The monthly print was seen rising less than expected. Kishida is reportedly considering reshuffling his cabinet early next year. USD/JPY remains in correction mode.

On the docket

• Canadian GDP


• Personal income, consumer sentiment and PCE inflation


• Home sales and building permits

FX 1-day relative performance (USD)

• Kiwi and Aussie 0.58% and 0.43% higher


• Loonie and euro a little up against USD


• Cable marginally higher vs the greenback


• Yen on the fall, 0.27% lower compared to dollar


• Crude and gold up 0.82% and 0.43%

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