Dear Clients,
Below is this weeks market forecast from our trade desk.
Last week caused a lot of market turmoil after US CPI put pressure on the USD, and hinted at a potential slow-down in US rate hikes, at the next meeting in December. Which looks like a 50BP rate hike could be priced into markets over the coming weeks. However, from our perspective, USD weakness could have opened the door for another potential strength play… the Japanese Yen. Once FED hawkishness peaks and global growth begins picking up. The BOJ could make a move for adjustments in their monetary policy.
In the FX market, we saw a glimpse of this strength and optimism towards JPY longs, after the CPI print which was negative for the USD. Causing DXY to retrace 3.95%, and the Japanese Yen to appreciate 5.03%. A double proxy for UJ downside.
US Oil that’s been closely correlated with US inflation continues to consolidate into this week around the $88 per barrel. Once again we do believe that if Oil prices do hold, we do think that the FED will find it hard to loosen up its hawkish stance. Especially if the labour market continues to hold.
On another note, strength from beta currencies this week could also bring some volatility into the market, as CAD and AUD strength will drive commodity prices higher putting additional pressure on the USD.
Overall, we look for the market to re-trace and fill a lot of the imbalance made within the market from last week.
Other ‘High Impact’ news forecasted for this week include:
Mon (CAD) – BOC Gov Macklem Speaks.
Tue (USD) – PPI.
Wed (AUD) – Wage Price Index.
Wed (GBP) – CPI m/m.
Wed (CAD) – CPI m/m y/y.
Wed (USD) – Retail Sales.
Thu (AUD) – Employment change.
Thu (AUD) – Unemployment.
We wish you all a safe week in and out of the market.
Kind Regards,
LTI.