Foreign exchange trading reminder: PCE shows that inflation is slowing down, the dollar fell to a new low in nearly five months, pay attention to non-agricultural performance
At the beginning of the Asian market on Friday (December 2), the U.S. dollar index fell slightly, hitting a new low since June 30 to 104.56. Previous data showed that U.S. consumer spending grew steadily in October and inflation eased. It has raised expectations that the Fed is closer to peaking interest rates. Investors need to focus on the U.S. November non-farm payrolls report that will be released this trading day.
Federal Reserve Chairman Powell said on Wednesday (November 30) that it is time to slow down rate hikes, noting that “slowing down now is a good way to balance risks.”
Investors took comfort from the above remarks, although Powell also said that interest rates will still climb and that controlling inflation “will require keeping policy at a restrictive level for some time.”
Edward Moya, senior analyst at OANDA, said: “We are seeing that consumers are still continuing to spend, and on top of that, continuing claims are rising. So we may start to see unemployment rise, which I think will support the Fed The perception that it is close to completing its tightening cycle.”
Moya added, “The market will be looking for continued declines in Treasury yields, which will also be the reason for the dollar’s weakness.”
Data on Thursday showed consumer spending, which accounts for more than two-thirds of U.S. economic activity, jumped 0.8 percent in October, in line with economists’ expectations. The September reading confirmed a 0.6% increase.
The personal consumption expenditures (PCE) price index rose 0.3 percent in October, matching September’s gain. The PCE price index rose 6.0 percent in the 12 months through October.
Other data showed U.S. manufacturing activity shrank for the first time in two-and-a-half years in November, while U.S. construction spending fell in October.
Friday’s November jobs data is the next major focus for the U.S. economy.
The U.S. dollar index closed down 1.22% on Thursday to close at 104.70. It has lost the key position of the 200-day moving average of 105.56. If it cannot quickly rise back above the 200-day moving average, this may indicate further declines.
It rose 1.15% on Thursday to close at 1.0525. On Friday, the Asian market rose slightly at the beginning of the session, reaching a maximum of 1.0538, the highest since June 29. USD/JPY fell 2% on Thursday to close at 135.33. It dropped slightly in early Asian trading on Friday, reaching as low as 135.03, the lowest since August 18. The 200-day moving average below was supported around 134.50.
It rose 1.64% on Thursday, broke through the key position near the 200-day moving average of 1.2147, and closed at 1.2253. The highest intraday hit was 1.2310, the highest since June 27.
Traders of fed funds futures now expect the Fed’s benchmark rate to peak at 4.87% in May, from 3.83% now. Estimates peaked at more than 5% ahead of Powell’s speech on Wednesday.
Federal Reserve Governor Bowman said on Thursday that the Fed should slow down the pace of rate hikes to assess the impact of its rate hike cycle. But New York Fed President Williams reiterated that further rate hikes will be needed to reduce excessive price pressures.
In addition to the weakening of the US dollar, the market’s concerns about the epidemic in Asia have cooled, which also boosted the currencies of Australia and New Zealand.
It rose 0.37% on Thursday, hitting a new high since September 13 at 0.6844, and closing at 0.6811.NZD/USDIt rose 1.21% on Thursday, reaching a new high of 0.6398 since August 15, and closing at 0.9370.
Summary of Institutional Viewpoints
[GDPNow Model: Downgrade the U.S. Q4 economic growth forecast from 4.3% to 2.8%]
According to the data on December 1, the Atlanta Fed’s GDPNow model estimates that the real GDP growth in Q4 in the United States will be 2.8%, which is far lower than the 4.3% predicted on November 23. After recent data from the U.S. Census Bureau, the U.S. Bureau of Economic Analysis, and the Institute for Supply Management, expectations for Q4 real personal consumption expenditure growth fell from 4.8% to 3.2%, while Q4 gross domestic private investment growth expectations rose from 1.0% To 2.0%, the two are slightly offset. In addition, the expected contribution of changes in real net exports to real GDP growth in the fourth quarter fell from 0.64 percentage points to 0.16 percentage points.
[Invesco: The outlook for bond investors is promising next year]
A possible recession in 2023 bodes well for government bonds after rising (U.S.) bond yields this year, Invesco said in its 2023 outlook. Heading into 2023, with a recession the most likely scenario, government bonds will generally do well. Rising yields in 2022 mean government bonds now offer attractive returns. The silver lining to a painful sell-off in fixed income in 2022 is that valuations now look more attractive, with higher yields than at any point in a decade.
[Deutsche Bank: The decline in the Swiss franc is still limited, and it will take some time for the euro to rise to parity against the Swiss franc]
As the Swiss National Bank continues to take measures to curb inflation, the room for further declines in the Swiss franc is limited. SNB Deputy Governor Schlegel has made it clear that the central bank will continue to fight inflation, which supports expectations of further rate hikes in December. In view of the impact of the devaluation of the Swiss franc on inflation, the Swiss National Bank also retains the possibility of intervening in the depreciation of the Swiss franc.In our view, it will take a while for EUR/CHF to truly rise to parity