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Yields, Credit Worthiness, Trading and Geo-Political Risks

by with No Comment AMT MarketsAssetsFeatured Highlights

Yields, Credit Worthiness, Trading and Geo-Political Risks

Traders participating in Forex and equity indices this week may want to consider finding a very quiet room and avoiding the loud conjecture which is certain to be heard. U.S bond yields will remain a focal point the entire week, and Moody’s new negative label regarding U.S credit worthiness issued late on Friday will not help the Federal Reserve and Treasury as the size of U.S debt is called into question once again. Forex markets provided speculators velocity and volatility last Thursday and Friday, and this week’s risk events are certain to cause behavioral sentiment turbulence.

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USD/CNY Five Year Chart as of 13th November 2023

Added to the ‘fun’ for speculators this week will be the APEC Summit gyrations which will be held in San Francisco, and includes a scheduled meeting with President Joe Biden and President Xi Jinping this Wednesday. The meeting comes at a critical time as geo-political and economic concerns come from Asia, the Middle East and Eastern Europe.

However, traders should not allow their emotions to grow too nervous, financial institutions actually showed a taste for U.S equity indices last week and the price of gold has declined, while the value of Crude Oil per barrel has also eroded. This shows that even in the midst of carnival like barking from pessimistic naysayers, that investors are still participating in the broad markets and makeing bets on the notion that optimism will continue to show sparks of light.

Monday, 13th of November, U.S Federal Budget Balance – this report is certain to be rather negative if studied closely. However, investors already know this story, and last week’s Moody’s downgrade of U.S credit accountability has already rang alarms. Thus, this report will likely fall on deaf ears today.

Tuesday, 14th of November, E.U Flash GDP – the numbers from the European Union are exected to be negative. However, last week’s slightly better than expected Germany Factory Orders may help the European Gross Domestic Product results limit the capability of a surprisingly bad decline. An expectation of only minus -0.1% is awaited.

Tuesday, 14th of November, U.S Consumer Price Index – the inflation numbers from the States will get the attention of most global investors. The results are sure to affect the USD, Treasury yields and equity markets. A weaker than expected outcome could propel the USD lower. Stronger than estimated statistics could ignite buying of the USD based on the notion the Fed will feel compelled to remain aggressive via its monetary policy rhetoric.

Wednesday, 15th of November, China Industrial Production – while the APEC Summit is highlighted by the media, it is economic data from China which remains important. Data from the nation continues to be lackluster and demand for commodities, the USD/CNY, domestic real estate and conusmer spending are all being watched and questioned by financial analysts. A gain of 4.5% is expected.

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GBP/USD Three Month Chart as of 13th of November 2023

Wednesday, 15th of November, U.K CPI, the inflation numbers from Britain will be important and will follow Tuesday’s Average Earnings Index publication. The GBP/USD has found choppy terrain and the results of the combined numbers from the U.K will affect Forex, even if USD centric considerations remain key.

Wednesday, 15th of November, U.S Producers Price Index, Retail Sales, and the Empire State Manufacturing Index – these reports will be issued at roughly the same time and will factor into sentiment created from the U.S CPI data seen the day before. The combination of all these outcomes will play into the broad markets, and the USD within all major currency pairs. Weaker than anticipated numbers would be welcome by USD sellers. However, until the reports are published wagering on the USD will prove volatile and risk management is encouraged.

Thursday, 16th of November, U.S Federal Reserve Officials – at least 4 U.S Federal Reserve members will be speaking at various conferences. They are sure to give their opinions on the Federal Funds Rate outlook and will be asked to comment on the week’s data already published in the U.S regarding inflation and consumer spending.

Friday, 17th of November, U.K Retail Sales – a gain of 0.3% is expected compared to last month’s negative results. Speculators will react to the consumer driven data and the GBP/USD will again come under the influence of risk sentiment regarding outlook. However, traders need to understand these numbers are largely a result of looking backwards and not forwards regarding outcomes.

Friday, 17th of November, U.S Housing Starts and Building Permits – the American housing industry is being closely monitored and the high costs of mortgages is affecting the U.S marketplace. The Building Permits number is expected to be slightly lower than last month’s outcome. Traders should also keep their eyes on the potential of revisions to suddenly emerge from previous reports.

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Last Week Caught Many by Surprise, as Fed Looms Wednesday

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

Last Week Caught Many by Surprise, as Fed Looms Wednesday

The ECB obviously decided to highlight how seriously they want to fight inflation last Thursday, when they increased their Main Refinancing Rate by a quarter of a point. The move was not only a surprise to many financial institutions, but displayed a large ‘miss’ by most analysts. While some point out the European Central Bank is powered by Germany who have a historically bad memory regarding inflation, it would also be correct to acknowledge the ECB is trying to protect their own currency against the potential volatility the Federal Reserve could cause with a rather aggressive monetary policy stance this coming Wednesday.

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WTI Crude Oil One Month Chart as 18th Sept. 2023

Another broad market influence as this week begins remains the high price of Crude Oil which has now surpassed 90.00 USD per barrel. The higher energy price will certainly not calm inflation anxiousness. Higher energy costs equate into costlier logistics, manufacturing, and agricultural production – this is not a problem central banks wished upon their plates as the final quarter of 2023 gets set to start in a couple of weeks.

Monday, 18th of September, Canada Housing Starts – the housing market in Canada is important to its economy and the nation has enjoyed a housing price bubble for a couple of decades. The past two months have produced higher than expected Housing Starts numbers which is intriguing because Canada is suffering from lackluster growth. The USD/CAD could move slightly on this result, but unless there is a profoundly surprising number from this report, the currency pair will remain focused on ‘other’ things to come.

Tuesday, 19th of September, Canada Consumer Price Index – last week’s CPI and PPI numbers from the U.S came in stronger than anticipated, and Canada’s projected estimates for Tuesday’s results nearly match the nation’s total from last month. Leaving the suspicious notion that inflation could possibly come in stronger in Canada like it did in the U.S last week since these two economies often mirror each other.

Wednesday, 20th of September, China One and Five Year Loan Prime Rates – China continues to be watched closely as investors point out potential dark shadows creating headwinds for the nation economically. The results regarding the loans taken by household and businesses are a solid barometer for outlook if the data is transparent.

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GBP/USD 3 Months Chart as of 18th Sept. 2023

Wednesday, 20th of September, U.K Consumer Price Index – the anticipated numbers expects an inflation result of 7.1%, which would be remarkably high and not treated kindly. The results will create havoc in the GBP/USD because not only is the Fed is waiting literally in the wings after this report, but the BoE is going to respond on Thursday.

Wednesday, 20th of September, U.S Federal Reserve Funds Rate – one week ago this day didn’t look like it would cause that much excitement. This all changed last Thursday when the ECB raised its borrowing costs and put financial institutions into a full state of alarm. Yes, the ECB may have acted on its own, but some suspect they know what the Fed is planning on doing already. The Fed is not expected to raise interest rates, but they will certainly sound aggressive and point out inflation remains a danger. Here’s the thing, the ECB sounded quite confident last Thursday, that it will not raise its interest rates again in the mid-term, essentially saying they were done. Did the ECB base this on knowledge that the Fed could do the same thing? What was perceived as a potentially sleepy and quiet Fed meeting and FOMC Statement has now taken on major importance. Forex, U.S Treasuries and global equities will move based on the Federal Reserve’s action and rhetoric. How will the Fed react to higher inflation data?

Thursday, 21st of September, U.K Bank of England Official Bank Rate – the BoE is widely expected to raise the borrowing rate by a quarter of a point. If the Fed did not raise rates the day before and the BoE acts as expected, this could in theory help the GBP/USD gain. However, it should be pointed out following the ECB’s interest rate hike last week, the EUR/USD traded into this past weekend weaker.

Friday, 22nd of September, E.U, U.K and U.S Services and Manufacturers PMI – Europe, Great Britain and the U.S will all release this data on Friday and all expect rather lackluster results. While this data is important, the broad financial markets will likely still be reacting to the actions of the major central banks and the credit crunch problems they are causing globally for consumers and businesses who are facing cash shortfalls and costlier loan expenditures.