JASPER’S MARKET SQUAWK 19-05-2023

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JASPER'S MARKET SQUAWK 19-05-2023

Markets Boosted by Commentary, Earnings

The dollar rose on Thursday on the back of hawkish Fedspeak commentary, while stocks also saw an uptick amid positive debt-ceiling talks and upbeat earnings. Gold and the euro fell.

Chart: EURUSD

Key Factors for Today

• Hawkish Fedspeak pushes the dollar higher, resulting in gold 1.25% drop


• EUR/USD breaks below the $1.08 handle despite US home prices falling to 11-year low


• Japan’s core inflation spikes, USD/JPY marks 6th consecutive day of gains on Kuroda


• UK consumer confidence improves but remains firmly negative; Cable tumbles 0.62%


• Kiwi rises after ASB Bank upgrades RBNZ outlook for next week’s meeting

Gold Down 1.25% on Hawkish Fedspeak

Fedspeak leaned mainly hawkishly on Thursday, sending yields and the dollar up, with expectations for a June 25 bps hike rising to 40%, compared to 10% a week ago. House Speaker Kevin McCarthy said a deal on raising the debt limit could be put to the floor as soon as Tuesday boosted markets, partially higher due to earnings reports. Gold fell 1.25% to $1960 per ounce, opening the door to $1920 per ounce unless bulls quickly recapture $1980 per ounce.

US Home Prices to 11-year Low, EUR/USD Pressured from Philly Outlook

The dollar saw an uptick despite Homes Sales falling 3.4% in April from the prior month, while prices dropped 1.7% from a year earlier – the biggest YoY decline since 2012. Existing Home Sales also declined due to rising mortgage rates, which has weighed on demand. But the Fed Philadelphia business outlook was much better than expected at -10.4 compared to -20 anticipated, supporting yields in the short end of the curve, widening the 2-10 year inversion to -61pts. EUR/USD lost 0.65% on Thursday, breaking below the $1.08 handle for the first time since March. With$1.07732 exposed, the path to $1.07 is nearby.

Japan’s Core Inflation Spikes, USD/JPY Record 6th Session of Gains

Japan’s headline inflation was in line with expectations, but core annualised CPI change jumped to 4.1% compared to the 3.8% expected, the fastest increase since the autumn of 1981. In testimony before parliament, BOJ Governor Kazuo Ueda affirmed the bank’s stance on accommodating monetary policy. USD/JPY has now put in its 6th consecutive session of gains, shy of 139.00 but comfortably above 137.45 and to levels not seen since past November. 140.00 is only a major resistance ahead for bulls.

UK GfK Confidence Improves, but Firmly Negative

Consumer confidence, as measured by GfK, rose for the fourth consecutive month to -27, in line with expectations, with the head of the research firm saying that the measure is “still deep in negative territory and a long way” from returning to positive. GfK now sees a 43% chance of a recession this year, the lowest reading since last June. Cable tumbled 0.62% on Thursday to $1.24 but found temporary support there. If bulls increase their bets, some respite toward $1.2486 might be seen. Otherwise, $1.2350 may act as the next major level of support.

Kiwi Higher After ASB Upgraded its RBNZ Outlook

The ASB Bank now expects the RNBZ to hike by 50bps at next week’s meeting, compared to a recent consensus of just 25bps. This follows several Kiwi banks raising their expectations for the terminal rate to 5.75-6.0% and above the RBNZ’s terminal forecast of 5.50%. Kiwi trades 0.30% higher on Friday morning but remains largely mixed between $0.6220 and $0.6260.

On The Docket

• Canada Retail Sales


• Fed Williams Speech


• Fed Bowman Speech


• ECB Schnabel Speech


• Fed Chair Powell’s Speech


• ECB Lagarde Speech

Fx 1-Day Relative Performance (USD)

• Aussie is 0.21% higher, but Kiwi at +0.26%


• Euro unchanged, pound down by 0.05%


• Loonie and Franc 0.06% up


• Japanese yen up by 0.28%


• Gold is 0.26% higher, silver is up by0.75%


• Crude and Brent both up by 0.76%


• Natural gas is up by 0.19%

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