The GBP is the strongest and the JPY is the weakest as the NA session begins. The Bailey comments late yesterday that the bond buying would cease on Friday, hurt the GBP but it has since moved back higher today. However, it did little to stop the selloff in UK debt which has seen the 10 year rise around 12 basis points. The 30 year is up around 20 basis points. The GBPUSD stalled its downside move in the Asian session today at the 50% retracement target of 1.09242 (see post here), and bounced back higher. As the NA session begins the pair was up retesting the falling 100 hour MA at 1.10909. Although higher, the GBPUSD at least is ping ponging from support to resistance and keeps the sellers in control.
For the JPY, the Asian traders took the USDJPY price above the intervention high from September at 145.90 and did not run into any intervention from the central bank. That has given the fundamental flows the go-ahead to push higher in the USDJPY with the high price (lower JPY) reaching to 146.625. Get disorderly, and the BOJ may still enter at any time, but they seem to be content with letting the cards fall where they may for now.
The PPI kicks off the PPI/CPI combo today at 8:30 AM. The expectation is for 0.2% MoM and YoY to dip to 8.4% from 8.7% as it continues to run off higher numbers from last year. The ex food and energy is expected to rise by 0.3% with the YoY steady at 7.3% though. The more important CPI is due out tomorrow at the same time.
The Fed minutes from the last meeting will be released at 2 PM ET. The Fed out hawked the hawks by pushing the EOY rate to 4.4% (so 4.25-4.5% target range), and the terminal rate in 2023 to 4.6% (one more 25 basis point tightening in 2023 bringing the rate to 4.5-4.75% range). That makes the playbook imply a 75-50-25 basis point rise progression into restrictive policy followed by a pause for the rest of 2023. The Fed has been characterized as being stubborn - perhaps to a fault - to maintain credibility. They did it at the lows with their insistance inflation was transitory and they are now onto their restrictive playbook to kill inflation. Any clues in the report to something different than 4.6%ish will be eyed. With NFP/unE out of the way, it would take a big surprise in the inflation numbers to move the needle for a 75 bp hike.
In other markets:
- spot gold is trading up $1.62 or 0.09% at $1667.52
- spot silver is trading unchanged at $19.14
- WTI crude oil is trading up $0.30 at $89.64
- bitcoin is fairly steady at $19,123
In the premarket for US stocks, the major indices are trading higher.
- Dow industrial average is up 132 points after snapping its 4 day decline yesterday with a modest 36.31 point rise
- S&P index up 22.5 points after yesterdays -23.57 point decline. The S&P index is on a 5 day losing streak and close below its 200 week moving average yesterday. The 200 week moving average is currently near 2600. The price closed at 3588.83
- NASDAQ index is up 99 points after yesterdays -115.91 point decline. The NASDAQ is on a 5 day losing streak as well
in the European equity markets the major indices are unchanged to lower:
- German DAX, unchanged
- France CAC unchanged
- UK's FTSE 100 -0.4%
- Spain's Ibex -1.0%
- Italy's FTSE MIB -0.5%
In the US debt market, the yields are marginally higher with a steeper yield curve (2 year is little change while the 10 year is up). The US treasury will auction off reopened 10 year notes later this afternoon. The 10 year yield is trading near 4%. Will attract investors at that level? It will be the highest auction yield since June 2009. Last month the high yield came in at 3.33%.
In the European debt market the benchmark 10 year yields are trading higher:
