UBS is sticking to its bullish gold forecast.

• says the move higher for equities and lower for gold is a 'highly optimistic' view for lower policy and political risk, this is premature
• expect US yields and US dollar to move into downtrend, which will support gold
• gold fundamentals, as a hedge and diversity play, are intact

The latest Labour Force report from the Australian Bureau of Statistics, for October 2024.

Employment +15.9k

• expected +25.0k, prior +64.1k

Unemployment Rate 4.1%

• expected 4.1%, prior 4.1%

Participation Rate 67.1%

• expected 67.2%, prior 67.2%

Full Time Employment +9.7k

• prior +51.6k

A slightly softer employment report than we are accustomed to. Not a bad one. But a miss for jobs added, and the participation rate saw a tic knocked off.

More:

• employment to population ratio remained at 64.4%
• underemployment rate decreased to 6.2%
• monthly hours worked increased to 1,972 million.

more to come

The October jobs report from Australia was not as strong as we have become accustomed to:

• Australian October unemployment rate 4.1% (vs. 4.1% expected)

It was not a poor report, just not another blockbuster!

AUD/USD is not a lot changed. Earlier we had Reserve Bank of Australia Governor Bullock sounding not dovish:

• RBA Bullock says rates are restrictive enough, staying there until confident on inflation

Japan's former vice minister of finance for international affairs, Masato Kanda was reported with comments on Wednesday ICYMI.

• currency market volatility had increased reflecting recent changes in monetary policies and political situations in major countries
• "There is no change to our stance that we will need to respond appropriately to excess movements on the currency market as excessive foreign exchange volatility is undesirable"

His comments have not slowed the yen decline:

***

Kanda is now a special adviser to Prime Minister Shigeru Ishiba and the finance ministry., said in an interview that currency market volatility had increased reflecting recent changes in monetary policies and political situations in major countries.

Chinese media, Global Times, citing a state media report (CCTV):

• China’s annual production of new energy vehicles surpassed 10 million units on Thursday, info via China Association of Automobile Manufacturers.
• the first country to reach this milestone globally
• output for the whole year is expected to reach 12 million

The US and EU have quickly built walls (tariffs and other imposts) to protect domestic vehicle producers. This is not usually a recipe for thriving industry.

The rising USD continues to ... rise still.

EUR/USD is circa 1.0555 and at its lowest since November last year.

The Federal Reserve appears to be on track for a December rate cut but its not bothering dollar bulls, taking their cues from the world of politics dollar-bostering Trump policies. Trump, of course, won't in the big chair until after January 20 but markets discount the future. Or what they expect in the future anyway. And that's a stronger dollar for now.

Still no efforts from Japan to talk up the yen.

The USD is stronger pretty much everywhere.

USD/JPY has pooped above 156.00 and its straddling thereabouts as I post.

No fresh news apart from whats been posted. Not that any is needed right now.

• New York Fed's Williams speaking Thursday - Kugler, Barkin also (Powell too!)
• Australian jobs report recap - "remains in relatively solid health"
• Bank of England Monetary Policy Committee member Mann is speaking again on Thursday
• People's Bank of China has more work to do to support the yuan
• European Central Bank President Lagarde and VP de Guindos speaking Thursday, Schnabel too
• Federal Reserve Chair Powell is speaking on Thursday
• GBP traders heads up - Bank of England Governor Bailey is speaking late Thursday
• China’s annual production of new energy vehicles surpassed 10 million units on Thursday
• PBOC sets USD/ CNY reference rate for today at 7.1966 (vs. estimate at 7.2326)
• ICYMI: Ex-Mr Yen Kanda said Japan will act appropriately against excess FX movements
• AUD/USD little changed after the October employment report showed a steady jobless rate
• Australian October unemployment rate 4.1% (vs. 4.1% expected)
• UBS maintain a US$2900 target for gold
• RBA Bullock says rates are restrictive enough, staying there until confident on inflation
• USD/JPY above 155 - Citi wary of intervention risk
• Investment bank bullish on Fed rate cuts; inflation concerns linger
• Oil - private survey of inventory shows headline crude oil draw vs build expected
• New Zealand data - FPI -0.9% in October (prior +0.5%)
• Forexlive Americas FX news wrap 13 Nov: US CPI comes out as expected. USD continues rise
• Trade ideas thread - Thursday, 14 November, insightful charts, technical analysis, ideas

The continuing US dollar uptrend … continued.

USD/JPY traded, above 156.00, to a high not seen since July. EUR/USD, meanwhile, dropped under 1.0550 to a low not seen in a year. AUD, NZD, GBP, CHF, CAD, yuan all moved lower. As did hapless gold. BTC/USD dropped back from above US$93.5K, but this thing is a beast, it gets a free pass ;-) .

On the data front the release of note was Australia’s job report for October. Job growth slowed down and the unemployment report steadied at 4.1%. It was a solid report without being spectacular. Slowing wage growth (data released yesterday) and a steady job market leaves the Reserve Bank of Australia to focus on bringing inflation down. RBA Governor Bullock spoke during the session. Bullock was not dovish, signalling that rates are restrictive enough but will not be coming down imminently.

The People’s Bank of China once again set the USD/CNY reference rate weaker (stronger for CNY) than estimates indicated.

Noting this, report comes from Japan media (Sankei) via Reuters:

• Japanese government to compile a supplementary budget of about 13.5 trillion yen ($87 billion)
• to fund a stimulus package to help low-income households and offset rising prices
• government would provide 30,000 yen to low-income households that are exempt from residential taxes and 20,000 yen per child for households with families

There is just one to take note of, as highlighted in bold. But dollar domination is the name of the game now, so just be wary that the expiries aren't going to matter all too much.

The one highlighted is for EUR/USD at the 1.0550 level. However, it isn't one that holds any technical significance now that the pair has broken below the April low of 1.0601. The 1.0500 mark is next on the cards with the October 2023 lows beckoning below that closer to 1.0450.

The monthly chart for the pair highlights how we've been in a range between roughly 1.0500 to 1.1200 since the start of 2023. So, there is some key technical focus towards the downside support there and that's the more important level to pay attention to with the dollar continuing to push upwards.

For more information on how to use this data, you may refer to this post here.

That makes it a congressional red sweep and the question now is just how much of a majority will they command in the House? The latest NYT projections here show Republicans do have the needed 218 seats claimed for a majority. However, there are still 9 seats yet to be called.

There are some seats such as Iowa 1 and California 45, which are toss ups, that could go to a recount and take a longer time to settle due to the current margins. For some context, here is a list of the more competitive districts as a reference.

But even if you give those two to the Democrats, Republicans will at least snag Alaska 1 to end with 219 seats. That is the bare minimum that they should win with when all is said and done.

There was a bit of a wrestle after the US CPI report yesterday but eventually, the dollar once again reigned supreme. EUR/USD saw a break below the April low of 1.0601 and has now traded down to fresh lows for the year. As the greenback continues to run a rampage, it is starting to draw in a rather critical level for EUR/USD in the bigger picture:

As seen from the above, the pair has been sort of stuck within a range of 1.0500 to 1.1200 roughly since the start of 2023.

As such, there looks to be an inevitable pull towards the 1.0500 mark now as sellers have proven their mettle at each and every other test since the start of October trading. The most recent of course being the fall below the April low of 1.0601, as mentioned above.

Taking the technical backdrop above into consideration, it pretty much means we're reaching a very, very critical juncture in gauging the post-election dollar momentum.

A firm break below 1.0500 is not only one to set off any further declines in EUR/USD. But the spillover potential means that it is going to spur even further gains in the dollar as we look towards year-end.

There is certainly strong arguments for that, as Adam pointed out here. But are traders going overboard in frontrunning the potential for the Trump trade and tariffs? That's something to consider as well perhaps.

For now, the momentum trade is name of the game in FX. However, don't ignore the implications set out by key technical boundaries such as the one in the chart above. That will be vital in determining the strength and resolve of the dollar momentum we're seeing now.

The dollar continues to push higher in the post-election period and in the case of USD/JPY, that momentum is helped by higher yields as well. The pair has been on a tear since October trading, racing up from 143.00 all the way to touching 156.00 earlier today. The break above 155.00 yesterday is a crucial one, signifying another breach of a key technical/psychological level.

When it comes to USD/JPY, there's always something about big figure levels. And this is arguably no exception.

With buyers clearing the key daily moving averages and 150.00 mark last month, the focus has been drawn on the 155.00 mark since. And inevitably with Trump winning the election, we've finally gotten there today.

And having done so, we're into a bit of a pocket of space with little to no technical resistance all the way to 160.00 potentially.

It doesn't mean we'll get there overnight but it does present an attractive level for buyers to take aim at. Nonetheless, the pace of any further gains will of course be another thing to be mindful of though.

That might invite scrutiny from Japan officials to verbally intervene. As for any real intervention threat, it's going to be tough to fight the underlying market momentum in play currently. So, I wouldn't imagine Tokyo trying that out - at least for the time being.

The bond market is once again going to be a key driver to be mindful of when it comes to USD/JPY. But for now, the overall dollar bullishness is also helping to underpin the pair rather strongly. That especially when the greenback is starting to creep up on some key technical levels in the bigger picture, as seen here with EUR/USD.

The pullback in gold continues to play out since the post-election period. The precious metal is now down for a fifth straight day in what is already easily its worst weekly showing so far this year. It has more or less been a case of waiting for said pullback to reach some key technical levels on the charts. And we're just about there already in trading today.

The 100-day moving average (red line) is the key technical focus right now and that is seen at roughly $2,543. The last time gold actually had a brush against the key level was all the way back in February. And the last time that gold traded back below either that or its 200-day moving average (blue line) was all the way back in October last year.

That underscores the breathtaking momentum that has been in play for gold all through this year so far.

As such, this makes the 100-day moving average an even more important technical juncture now. A break there will not only signify a break in the bullish bias in gold. However, it could set off another wave of selling that leads to an even bigger pullback.

Traders love key levels like these and USD/JPY is a good example of that when it broke its own 100-day moving average back in late July as well. The drop there of course owed to a myriad of other factors but the technical consideration certainly exacerbated things. And it could also be the case for gold when we get there in the sessions ahead.

I'm still an advocate for gold in the bigger picture of things. However, I would say dip buyers will need to be patient to let this correction run its course before coming back in. From earlier this week: Gold pullback might prove to be timely for dip buyers

The US CPI report yesterday here provided some reason for a push and pull in markets but ultimately, the dollar settled higher as it continues its post-election momentum. It's tough to fight that especially with dollar bulls also seeking out key technical breaks on the charts. And the greenback is once again keeping a little firmer today:

EUR/USD is holding at its lowest levels this year after the break below the April low of 1.0601 overnight. Meanwhile, USD/JPY had a brief brush against 156.00 earlier as it eyes further gains alongside an uptick in Treasury yields.

Elsewhere, GBP/USD is closing in on its August low of 1.2665 while USD/CAD is up to its highest levels since 2020 in a push above 1.4000. It's all about the dollar as it rampages on in the post-election period.

Looking to the session ahead, there isn't anything on the agenda in Europe to shake up that sentiment. All eyes will once again fall on more US data later in the day to perhaps add to the mix. Otherwise, the euphoria from Trump trades is still very much permeating across broader markets with Bitcoin also hoping to firmly clear $90,000 since yesterday.

0800 GMT - Spain October final CPI figures1000 GMT - Eurozone Q3 GDP second estimate1000 GMT - Eurozone September industrial production

That's all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.

• German DAX futures -0.1%
• UK FTSE futures -0.2%

This comes with S&P 500 futures also seen down by 0.2% currently. Wall Street had a mixed day but overall was little changed, as investors pumped the brakes on the post-election euphoria for the time being. In Europe, things are still muddy as the threat of Trump tariffs continue to cloud the bigger picture outlook for next year.

And that is thanks to Beijing disappointing markets once again with a failure to live up to stimulus announcements. It was the case right after the Golden Week holiday and it was the case again on Friday last week. With the drop today, the CSI 300 index closes down by 1.7% to post its lowest close this week.

It's been a rather back and forth last few days but the feeling is that there are hints of exhaustion when it comes to Chinese equities at the moment. That especially since Beijing has not followed up on the rallying momentum prior to the Golden Week holiday.

In the bigger picture, China is a very, very attractive opportunity as valuations are cheap and price levels are low at the moment. And that provides an alluring proposition for any investor, that is if you can ride this wave out. I'm definitely keeping an eye out but I'm not entirely convinced that this is where the turning point is, especially since local authorities have not delivered in recent weeks.

The technical breakout at the end of September is a good starting point but I fear that with a lack of convincing, China stocks might slip back into old habits and slide down again in the weeks ahead. The warning signs are definitely building to say the least: It's not a pretty picture in China

The European session is going to be once again a bit empty on the data front with just a couple of low tier data points. We get the 2nd estimate of the Eurozone Q3 GDP and the ECB Meeting Minutes. Both of them are old news and the market won't care much about it.

In the American session, the focus will be on the US PPI and Jobless Claims data. Yesterday's US CPI came in line with expectations and after a bit of a "sell the fact" reaction in the US Dollar, the market started to bid it again.

The CPI wasn't the main culprit though as the momentum got triggered by Fed's Logan comment saying "models show that Fed funds could be very close to neutral" potentially implying a lot more cautious approach on rate cuts in 2025.

13:30 GMT/08:30 ET - US October PPI

The US PPI Y/Y is expected at 2.3% vs. 1.8% prior, while the M/M measure is seen at 0.2% vs. 0.0% prior. The Core PPI Y/Y is expected at 3.0% vs. 2.8% prior, while the M/M figure is seen at 0.3% vs. 0.2% prior.

This report will be seen in light of the US CPI data yesterday as it will give us a better estimate of the US Core PCE due at the end of the month. An upside surprise might trigger some more US Dollar gains as the market could price out some more the rate cuts expected in 2025, but the December cut remains pretty much assured.

13:30 GMT/08:30 ET - US Jobless Claims

The US Jobless Claims continues to be one of the most important releases to follow every week as it’s a timelier indicator on the state of the labour market.

Initial Claims remain inside the 200K-260K range created since 2022, while Continuing Claims after an improvement in the last two months, spiked to the cycle highs in the last couple of weeks due to distortions coming from hurricanes and strikes.

This week Initial Claims are expected at 223K vs. 221K prior, while Continuing Claims are seen at 1880K vs. 1852K prior.

Central bank speakers:

• 08:30 GMT - ECB's de Guindos (dove - voter)
• 13:00 GMT/08:00 - BoE's Mann (hawk - voter)
• 14:00 GMT/09:00 ET - Fed's Barkin (neutral - voter)
• 15:00 GMT/10:00 ET - Fed's Kugler (dove - voter)
• 18:30 GMT/13:30 ET - ECB's Schnabel (hawk - voter)
• 19:00 GMT/14:00 ET - ECB's Lagarde (neutral - voter)
• 20:00 GMT/15:00 ET - Fed Chair Powell (neutral - voter)
• 21:15 GMT/16:15 ET - Fed's Williams (neutral - voter)

• Prior +1.5%
• HICP +1.8% vs +1.8% y/y prelim
• Prior +1.7%

Core annual inflation was seen at 2.5% on the month, up slightly from 2.4% in September. That just reaffirms a small bump in the works in the disinflation process. But given recent developments, the ECB will still feel comfortable in sticking with rate cuts for now.

• Eurostoxx +0.6%
• Germany DAX +0.7%
• France CAC 40 +0.3%
• UK FTSE flat
• Spain IBEX +0.3%
• Italy FTSE MIB +0.4%

It's still early in the day but European indices are at least hoping to recover some poise after the fall earlier in the week. US futures are also seen flattish at the moment, after having been down earlier in the day. So, that's at least helping with the broader market mood. But again for Europe, the outlook remains challenging considering all the recent developments with regards to German politics and the US election result.

Why it's important?

The ranges of estimates are important in terms of market reaction because when the actual data deviates from the expectations, it creates a surprise effect. Another important input in market's reaction is the distribution of forecasts.

In fact, although we can have a range of estimates, most forecasts might be clustered on the upper bound of the range, so even if the data comes out inside the range of estimates but on the lower bound of the range, it can still create a surprise effect.

Distribution of forecasts for PPI

PPI Y/Y

• 2.4% (11%)
• 2.3% (68%) - consensus
• 2.2% (16%)
• 2.0% (5%)

PPI M/M

• 0.4% (2%)
• 0.3% (13%)
• 0.2% (74%) - consensus
• 0.1% (7%)
• 0.0% (2%)
• -0.1% (2%)

Core PPI Y/Y

• 3.1% (12%)
• 3.0% (47%) - consensus
• 2.9% (35%)
• 2.7% (6%)

Core PPI M/M

• 0.3% (57%) - consensus
• 0.2% (40%)
• 0.1% (3%)

Analysis

We can ignore the headline PPI as the market will focus on the Core figures. We can notice that the expectations are skewed to the downside, so a higher than expected reading would be taken as more hawkish and likely give the US Dollar another boost. Conversely, a soft print could trigger a pullback.

The US Dollar remains in an uptrend as the market continues to price out the rate cuts expected in 2025. Right now we have another 25 bps cut priced for December and just two 25 bps cuts priced in 2025 which is already much lower than the Fed's projection of four.

Therefore, there's still a couple of rate cuts to price out in 2025 if the data continues to run hot, but at that point we would need a real acceleration in inflation to have the market pricing in a rate hike. For now, the bar for rate hikes is really high as the maximum the Fed is willing to do is to pause the easing cycle.

Fundamental Overview

The US CPI yesterday came in line with expectations leading to a bit of a “sell the fact” reaction in the US Dollar.

The bullish momentum picked up a bit later though as Fed’s Logan delivered a hawkish comment saying that “models show that Fed funds could be very close to neutral” basically implying a lot more cautious approach on rate cuts in 2025.

The market is viewing all of this in light of the recent US election as Trump’s policies are likely to spur growth and potentially keep inflation above target for longer, making the Fed’s job of bringing inflation back to target a bit harder.

USDJPY Technical Analysis – Daily Timeframe

On the daily chart, we can see that USDJPY finally extended the rally into new highs helped by a hawkish comment from Fed’s Logan. There’s no strong technical resistance now at least until the 160.00 handle.

If we get a pullback, the buyers will likely lean on the trendline with a defined risk below it to position for a rally into the 160.00 handle. The sellers, on the other hand, will want to see the price breaking lower to start targeting a drop back into the 152.00 support.

USDJPY Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we have a minor upward trendline defining the current bullish momentum. If we get a pullback, the buyers will likely lean on it to position for new highs, while the sellers will look for a break lower to target a break below the major trendline.

USDJPY Technical Analysis – 1 hour Timeframe

On the 1 hour chart, there’s not much else we can add as from a risk management perspective, the buyers will have a better setup around the trendline, while the sellers are better to wait for a technical break lower instead of trying to catch the top. The red lines define the average daily range for today.

Upcoming Catalysts

Today we have the US PPI and the US Jobless Claims figures. Tomorrow, we conclude the week with the US Retail Sales data.

See the video below

Valhalla, Floki’s PlayToEarn Massively Multiplayer Online Role-Playing Game (MMORPG) blockchain game is proud to announce a partnership in the United Arab Emirates (UAE).

On Nov. 13, Valhalla unveiled a partnership with Dubai's Mall of the Emirates, marking a milestone in its global outreach efforts.

The partnership will see Valhalla’s branding prominently displayed across 93 screens in the mall for a four-week campaign running from November 15 to December 12.

Mall of the Emirates, located in the heart of Dubai, is one of the world’s most prestigious shopping destinations. Since opening in 2005, it has become an iconic landmark, attracting millions of visitors each year. The mall sees daily traffic of approximately 111,500 people, making it a prime venue for Valhalla’s campaign to reach a diverse and international audience.

The mall’s strategic location on Sheikh Zayed Road, a prime area in Dubai, combined with its diverse visitor base, offers Valhalla an opportunity to engage both local and international audiences.

Spanning an area of 255,489 square meters, the multi-level mall boasts over 630 retail outlets, 80 luxury stores, and 250 flagship stores. It also features some of Dubai’s most popular attractions, including the indoor ski resort Ski Dubai, the Magic Planet entertainment center, and VOX Cinemas. The mall’s dining options, with over 100 restaurants and cafés, further enhance its appeal as a top destination for both residents and tourists.

The Campaign’s Goal

Valhalla is ramping up its presence in the UAE, a key market for crypto adoption.

Despite its smaller population, the UAE ranks as the third-largest crypto economy in the MENA region, with $34 billion in crypto transactions recorded between July 2023 and June 2024. This represents an impressive 42% year-on-year growth, far outpacing the MENA average of 11.73%, according to Chainalysis.

Dubai’s rapid evolution into a crypto hub has been fueled by initiatives like the Dubai International Financial Centre (DIFC) and Virtual Asset Regulatory Authority (VARA), which offer crypto-friendly regulatory frameworks. This has drawn major players and startups, solidifying Dubai’s status as a global crypto leader.

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About Valhalla

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Key players from the financial services industry are looking forward to the latest edition of the highly anticipated Finance Magnates London Summit (FMLS:24), taking place at the historic Old Billingsgate between 18-20 November, in the heart of the City.

Now in its 13th year, the summit is expected to bring together more than 3,500 attendees, over 150 speakers, and 120+ exhibitors from across the world. As one of the premier financial events on the calendar, FMLS:24 is where executives in fintech, online investing, crypto and payments go to connect.

Among the most notable firms signed up to attend is X Open Hub, a leading provider of liquidity services. The company has just been confirmed as an official exhibitor at the event, meaning it will have a prime position on the expo floor via its own dedicated exhibition stand.

Open for business in London

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Fundamental Overview

The US CPI yesterday came in line with expectations leading to a bit of a “sell the fact” reaction in the US Dollar.

The bullish momentum picked up a bit later though as Fed’s Logan delivered a hawkish comment saying that “models show that Fed funds could be very close to neutral” basically implying a lot more cautious approach on rate cuts in 2025.

The market is viewing all of this in light of the recent US election as Trump’s policies are likely to spur growth and potentially keep inflation above target for longer, making the Fed’s job of bringing inflation back to target a bit harder.

AUDUSD Technical Analysis – Daily Timeframe

On the daily chart, we can see that AUDUSD broke through the recent low around the 0.6537 level and extended the drop into the 0.6460 level as the US Dollar restarted its run on stronger US data. The natural target should be around the 0.6362 level.

From a risk management perspective, the sellers will have a better risk to reward setup around the trendline. The buyers, on the other hand, will want to see the price breaking higher to start targeting a rally into the top of the yearly range around the 0.69 handle.

AUDUSD Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we have another minor downward trendline defining the current bearish momentum. If we were to get a pullback, the sellers will likely lean on the trendline with a defined risk above it to position for a drop into new lows. The buyers, on the other hand, will want to see the price breaking higher to start targeting a bigger pullback into the major trendline.

AUDUSD Technical Analysis – 1 hour Timeframe

On the 1 hour chart, there’s not much more we can add although we can see that we have a minor resistance zone around the 0.65 handle. If the price gets there, we can expect the sellers to pile in for move lower, while the buyers will look for a break higher. The red lines define the average daily range for today.

Upcoming Catalysts

Today we have the US PPI and the US Jobless Claims figures. Tomorrow, we conclude the week with the US Retail Sales data.

• Prior +0.3%
• GDP +0.9% vs +0.9% y/y second estimate
• Prior +0.6%

No changes to the initial estimates as this just reaffirms more modest growth in the euro area in Q3. But this is old news, as the focus is on the outlook next year with Trump tariffs set to come into the picture.

• Prior +1.8%; revised to +1.5%

Looking at the details, the drop here is largely driven by a decline in capital goods (-3.8%) and energy production (-1.5%). The former is seen declining back after a surge higher in August (+3.8%). The declines for the month are partially offset by increases in output for durable consumer goods (+0.5%) and non-durable consumer goods (+1.6%). The production for intermediate goods was flat on the month.

Rate cuts by year-end

• Fed: 20 bps (81% probability of rate cut at the upcoming meeting)

2025: 75 bps

• ECB: 34 bps (62% probability of 25 bps rate cut at the upcoming meeting)

2025: 145 bps

• BoE: 4 bps (85% probability of no change at the upcoming meeting)

2025: 56 bps

• BoC: 33 bps (67% probability of 25 bps rate cut at the upcoming meeting)

2025: 95 bps

• RBA: 2 bps (92% probability of no change at the upcoming meeting)

2025: 40 bps

• RBNZ: 55 bps (80% probability of 50 bps rate cut at the upcoming meeting/20% for a 75 bps cut)

2025: 170 bps

• SNB: 32 bps (72% probability of 25 bps rate cut at the upcoming meeting)

2025: 70 bps

Rate hikes by year-end

• BoJ: 13 bps (51% probability of 25 bps rate hike at the upcoming meeting)

2025: 44 bps

*where you see 25 bps rate cut, the rest of the probability is for a 50 bps cut

• An 'activist' approach means to cut less until it is clear inflation persistence has been purged
• I would be ready to cut rates in bigger steps when inflation risks have gone

As mentioned, she's arguably the most hawkish member on the policy committee. So, these comments need to be taken with that in consideration. Her comments are also reflected by her bank rate vote last week here, as she was the only member to dissent against the rate cut decision.

• Fed will 'most likely' need more cuts but should 'proceed cautiously'
• If Fed cuts too far past neutral, inflation could re-acclerate
• Difficult to know how many Fed rate cuts may be needed, and how soon they need to happen
• Fed has made a great deal of progress in bringing inflation down
• Fed not quite back to price stability yet
• US economic activity is resilient
• Labor market cooling gradually but not weakening materially
• Sees upside risk to inflation, downside risk to employment, says financial conditions may pose biggest challenges for monetary policy
• If bond yields continue to rise, the Fed may need less-restrictive policy

Logan last spoke in late October and wasn't quite this hawkish. I think the Fed cuts in December but takes a pause after that and waits to see how things play out.

St. Louis Fed Pres. Musalem is scheduled to speak at the top of the hour. Musalem is a voting member in 2025. Back on October 7, Musalem spoke and said:

• More rate cuts likely given economic outlook.
• Won't predict timing or size of future Fed easings.
• Personal rate outlook is above Fed’s median view.
• Costs of easing too much outweigh easing too little.
• Supported Fed’s decision last month to cut rates by 50 basis points.
• Policy patience has served Fed well.
• Cooler job market still consistent with strong economy.
• Expects inflation pressures to continue to abate.
• Expects inflation to converge to 2% over next couple of quarters.
• Financial conditions remain supportive of growth.
• Some economic activity slowed by rate policy, election uncertainty.

That was over a month ago. So how he weighs in now will be interesting given the backup in yields and other economic and other developments since that time

• Risks to the jobs market have remain unchanged or have fallen
• Fed may be on the 'last mile' to price stability, inflation expected to converge to 2% over the medium term
• Monetary policy well posited, Fed can 'judiciously and patiently' judge income data to decide on further rate cuts
• Strong economy on track for a 'solid' fourth quarter
• Growth is broad-balanced and driven by consumption, income growth, productivity, supportive financial conditions and wealth effects
• Recent high productivity could prove durably structural but that remains uncertain
• Core inflation remain elevated
• Pressure in services industries slowly abating

This is the third Fed official who has floated some more-hawkish hints. It's hardly a signal of a pause in December but early 2025 is going to be interesting. There are meetings in January, March and May. Assuming a cut in Dec, there is one cut fully priced in for that period (and a smidge more).

That sounds about right based on the comments and data but that's going to swing based on the next set of numbers and beyond.

• Rate cuts to date are an acknowledgement of growing confidence that inflation is on the path to 2% goal
• Hope productivity growth can outrun the effects of slowing population growth
• Won't let enthusiasm over rising productivity get ahead of data or commitment to reaching Fed goals

There isn't much of a hint on anything here.

More hawkish comments from the St Louis Fed President

• Inflation data is also stronger but has not yet changed view that policy is on a path to neutral
• There is likely space for a gradual easing of policy towards neutral rate
• Stronger data likely pushing Treasury yields higher
• Too soon to understand new administration
• Rising bond yields also offer a sense of higher inflation risk and some sense the Fed may not cut as much

The Bank of Canada looks likely to keep on cutting rates faster than the Federal Reserve. This is one factor in the strength of USD/CAD. I hope the yen bulls are taking note ;-)

UBS remain upbeat on further Federal Reserve interest rate cuts to come. Analysts at the bank acknowledge heightened concerns about inflation in the market, and also trimmed market pricing for cuts ahead.

Ahead of Wednesday's CPI report (Forexlive Americas FX news wrap 13 Nov: US CPI comes out as expected. USD continues rise) UBS points:

• Economic data signals a stronger-than-expected economy. Concerns about inflation remain

• Market expectations lean towards a slower pace of Fed rate cuts

• Fed officials view the current rate as restrictive but are balancing employment and inflation goals. A major inflation surprise would be required to shift policy outlooks.

• The Fed is likely to continue rate cuts, with a potential 25 basis point cut in December and further easing expected in 2025.

And, the data result was not enough to dissuade analysts at UBS from expecting further cuts from the FOMC ahead, referring to the in line CPI print not changing the underlying fundamentals and economy narrative.

***

The latest from FedWatch shows a solid expectation for a 25bp cut on December 18:

Citi analysts suggest that while the USD/JPY may briefly surpass ¥155, any sustained rally in the dollar against the yen could be capped by potential intervention from the Japanese government and anticipated rate hikes by the Bank of Japan.

• USD/JPY breach of ¥155, Citi notes that the Bank of Japan may have a stronger incentive to raise rates to 0.5% in its upcoming December meeting to counterbalance yen weakness.

• Despite current dollar strength, Citi maintains a bearish outlook for the USD/JPY in the longer term, suggesting limited upside for the pair heading into next year.

Reserve Bank of Australia Governor Bullock

• bond markets pretty well behaved globally
• bond markets reflecting increasing government debt
• think we are restrictive enough, will stay there until confident on inflation

More:

• recent inflation had both supply- and deand-sdie components
• aim is to lower inflation
• prices not going back to pre-covid level, that would be deflation and not going to have that

People's Bank of China USD/CNY reference rate is due around 0115 GMT.

The People's Bank of China (PBOC), China's central bank, is responsible for setting the daily midpoint of the yuan (also known as renminbi or RMB). The PBOC follows a managed floating exchange rate system that allows the value of the yuan to fluctuate within a certain range, called a "band," around a central reference rate, or "midpoint." It's currently at +/- 2%.

How the process works:

• Daily midpoint setting: Each morning, the PBOC sets a midpoint for the yuan against a basket of currencies, primarily the US dollar. The central bank takes into account factors such as market supply and demand, economic indicators, and international currency market fluctuations. The midpoint serves as a reference point for that day's trading.
• The trading band: The PBOC allows the yuan to move within a specified range around the midpoint. The trading band is set at +/- 2%, meaning the yuan could appreciate or depreciate by a maximum of 2% from the midpoint during a single trading day. This range is subject to change by the PBOC based on economic conditions and policy objectives.
• Intervention: If the yuan's value approaches the limit of the trading band or experiences excessive volatility, the PBOC may intervene in the foreign exchange market by buying or selling the yuan to stabilize its value. This helps maintain a controlled and gradual adjustment of the currency's value.

Yesterday the People's Bank of China propped up the yuan at this setting:

• PBoC promised stronger damping to support CNY, and that's what are seeing

I suspect we'll see similar support for the yuan again today.

USD/JPY is extending its gains.

So far no intervention type comments out of Japan - rapid, speculative, excess volatility .... blah, blah, blah. Nope, nothing. Yet at least. I thought we would haves seen some open mouths by now.

The People's Bank of China set the onshore yuan (CNY) reference rate for the trading session ahead.

• USD/CNY is the onshore yuan. Its permitted to trade plus or minus 2% from this daily reference rate.
• CNH is the offshore yuan. USD /CNH has no restrictions on its trading range.
• A significantly stronger or weaker rate than expected is typically considered a signal from the PBOC.

Previous close was 7.2330

In open market operations (OMOs):

PBOC injects 328bn yuan via 7-day RR, sets rate at 1.5%

• 19bn yuan mature today
• net injection is 309bn yuan

2100 GMT / 1600 US Eastern time on Thursday, November 14, 2024:

• Bank of England Governor Andrew Bailey will deliver a speech at the Annual Financial and Professional Services Dinner, Mansion House

We last heard from Bailey a week ago:

• BOE governor Bailey: I will not specify what gradual means for rate cuts
• BOE governor Bailey: We do not have a specific equilibrium level of interest rate in mind
• BOE governor Bailey: We still need to see services inflation to come down more broadly

Federal Reserve Chair Jerome Powell delivers a speech on his economic outlook, followed by a question and answer session.

• Powell participates in "Global Perspectives" conversation before event hosted by the Dallas Regional Chamber, World Affairs Council of DFW and the Federal Reserve Bank of Dallas
• @ 2000 GMT / 1500 US Eastern time

While the Fed seems committed to a December rate cut not all signs in the CPI data on Wednesday were encouraging.

0830 GMT / 0330 US Eastern time - Remarks by European Central Bank's vice president Luis de Guindos at 31 Encuentro del Sector Financiero organised by ABC and Deloitte in Madrid, Spain

1830 GMT / 1330 US Eastern time - Participation by ECB Board member Isabel Schnabel in policy panel "Reassessing Policy Tools for Current and Future Challenges" at 25th Jacques Polak Annual Research Conference "Rethinking the Policy Toolkit in a Turbulent Global Economy" in Washington, DC

1900 GMT / 1400 Remarks by ECB President Christine Lagarde at Choiseul Sovereignty Awards 2024 ceremony

I posted yesterday on the prospect of deeper than expected ECB rate cuts yet to come:

• ECB Interest Rate Forecast: Deutsche Bank's 7 reasons for projecting a lower terminal rate

Meanwhile, EUR is struggling near a one-year low:

Justin had the news from the People's Bank of China here on Monday:

• PBOC governor will maintain yuan exchange rate at a reasonable, balanced level

And on Wednesday we saw the Bank trying to support CNY at the reference rate setting:

• PBoC promised stronger damping to support CNY, and that's what are seeing

And again today:

• PBOC sets USD/ CNY reference rate for today at 7.1966 (vs. estimate at 7.2326)

Offshore yuan may have seen the memo but its not paying it much heed:

The PBoC supported the CNY through the last bout of USD/CNY super-strength. They'll be doing the same again this time around, wary of capital outflow if they let the yuan drift too much lower. They'll be hoping US inflation doesn't take off higher and the Fed pauses ... or reverses.

Mann spoke Wednesday:

• BOE's Mann: I describe myself as an 'activist' rather than a 'gradualist' on rates
• BOE's Mann: Inflation has definitely not been vanquished

Mann was the sole dissent at the previous BoE meeting, voting to keep the Bank rate on hold.

Speaking again at 1300 GMT / 0800 US Eastern time:

• at the Society of Professional Economists Annual Conference

Also on the speaker circuit is Governor Bailey:

• GBP traders heads up - Bank of England Governor Bailey is speaking late Thursday

The data is here from earlier:

• Australian October unemployment rate 4.1% (vs. 4.1% expected)
• AUD/USD little changed after the October employment report showed a steady jobless rate
  • (ps. AUD/USD has slid a little since this post, broadly stronger USD the culprit)

Westpac with the recap, in brief:

Australian labour market remains in relatively solid health

• employment growth slowing broadly in line with population growth
• average hours holding steady
• few signs that labour demand is capitulating to an extent that warrants concern
• labour market conditions remain somewhat tight ... this is not translating to stronger wage inflation pressures
• On balance, today’s update will see the RBA continue to remain focused on the dynamics around underlying inflation.

***

Speaking of the RBA, we heard from Bullock earlier, not dovish:

• RBA Bullock says rates are restrictive enough, staying there until confident on inflation

***

AUD/USD update:

Times below are GBT / US Eastern time:

1400 / 0900 Federal Reserve Bank of Richmond President Thomas Barkin speaks on the economy in fireside chat before the Real Estate Roundtable

1500 / 1000 Federal Reserve Board Governor Adriana Kugler speaks on "Central Bank Independence and Economic Outlook" before the Latin American and Caribbean Economic Association (LACEA) and the Latin American Chapter of the Econometric Society 2024 Meeting

2000 / 1500 Powell, as already noted

2115 / 1615 Federal Reserve Bank of New York President John Williams speaks before the "Intermediating Impact: Making Missing Markets" event hosted by the Federal Reserve Bank of New York

As head of the NY Fed Williams is vice chair of the Federal Open Market Committee (FOMC) and has a permanent vote at the table. .

Non policy-related comments.

• Inflation has come down quite a lot
• Recent data on prices are heading towards our 2% goal
• If inflation converges towards our goal, then monetary policy will respond accordingly

This just reaffirms their current stance and market pricing for a rate cut in December. The question now is, how much will the ECB move by? The odds of a 25 bps rate cut are at ~63% with the remainder pinned to a 50 bps move instead.