Daily Market Outlook by Kate Curtis from Trader's Way

[katetrades]

Forex Major Currencies Outlook (Aug 28 – Sep 1)

Inflation data from the US, Eurozone and Switzerland combined with NFP data and GDP data from the US and Canada as well as official PMI data from China will highlight the week ahead of us.

USD

New home sales in July surpassed expectations and came in at 714k, up from 684k in June. This is the highest number of new homes sold since February of 2022. Gains were led by sales in Midwest followed by sales in the West part of the country. This is yet another data point indicating resilience of the housing sector. Revision to the NFP number for March removed 306k jobs. This is a huge revision and undoubtedly a bad sign, but considering that market was bracing for a 500k jobs revision this can be seen in a positive light.

We will keep at it and job is not done are the main messages from Powell's speech at Jackson Hole and Fed will thread carefully. He reiterated that Fed is data dependent and added that there are signs that the economy is not slowing down as expected. Inflation remains too high and although weak inflation data is welcome Fed needs to see more. Fed will not change 2% inflation target. Powell acknowledged that monetary policy is restrictive.

The yield on a 10y Treasury started the week and year at around 4.25%, rose to new highs of 4.36% and finished the week at around 4.23%. The yield on 2y Treasury reached the high of 5.08%. Spread between 2y and 10y Treasuries started the week at -69bp then widened to -79bp only to come back down and finish the week at around -78bp. The 2y10y is has now been inverted for over a year. FedWatchTool sees the probability of a 25bp hike at September meeting at around 19% while probability of no change is at around 81%.

This week we will have second reading of Q2 GDP, PCE data and NFP on Friday. Headline NFP number is expected to come at around 180k with the unemployment rate remaining at 3.5%.

Important news for USD:

Wednesday:​

• GDP​

Thursday:​

• PCE​

Friday:​

• NFP​
• Unemployment Rate​

EUR

Preliminary August PMI data gave us an unpleasant surprise with services sector slumping down into contraction territory and printing 48.3 vs 50.3 as expected and down from 50.9 in July. This is the lowest services reading since February of 2021. Both new orders and new export orders have continued to decline deeper into contraction indicating weak domestic and foreign demand. Input prices have been on the rise due to wage increases, thus flaming inflation pressures. Manufacturing managed to improve a bit and printed 43.7 vs 42.6 as expected and up from 42.7 the previous month. Composite was dragged down by services sector and it printed a 31-month low of 47. ECB will be hard pressed to change their hawkish rhetoric and markets are lowering probabilities of September hike. Additionally, July and August PMI indicate another quarter of negative growth, but analysts expect a 0.1% q/q increase mostly due to income from tourism.

Second and final reading of Germany’s Q2 GDP was unchanged, coming in flat and confirmed that economy escaped technical recession by going into stagnation. Question can be raised if they really escaped recession especially after abysmal PMI data for Q3. Digging into details we can see that public consumption contributed positively with 0.1% q/q while public consumption was flat. Net exports were a drag while inventories were up indicating weak domestic and foreign demand. German Ifo survey showed further deterioration in all three categories: current situation, business climate and outlook.

This week we will have preliminary inflation data for the month of August.

Important news for EUR:

Thursday:​

• CPI​

GBP

The worst preliminary PMI for the month of August came from the UK. They saw all three components declining with all three of them now in recession territory. Manufacturing slumped to 42.5 from 45.3 in July, services came in at 48.7 vs 51.5 the previous month and they both collectively dragged composite down to 47.9 from 50.8 in July. The report shows easing of inflationary pressures as weak demand reduces price setting power of companies. Reduction of inflation is coming at the high cost as growth is severely dampened. That was BOE’s plan, to cause subdued growth in order to fight off inflation. September rate hike is still in play, but markets are positioning as it will be the last one in this cycle.

AUD

PBOC has delivered a 10bp rate cut to their 1-year Loan Prime Rate (LPR) which now stands at 3.45% vs 3.55% previously. Markets were expecting a 15bp rate cut. Additionally, they have left 5-year LPR rate unchanged at 4.20%. LPR rate is used as a basis for commercial banks when they determine interest rates for new loans for their customers. Lower than expected rate cut and no cut to longer tenor rate caused further weakening in AUD and NZD.

This week we will have official PMI data from China.

Important news for AUD:

Thursday:​

• Manufacturing PMI (China)​
• Services PMI (China)​
• Composite PMI (China)​

NZD

Q2 retail sales came in at -1% q/q vs -2.6% q/q as expected and improved from -1.4% q/q in Q1. When we look y/y we also see improvement from -4.1% in Q1 to -3.5% in Q2. Core retail sales have continued to decline and came in at -1.8% q/q vs -1.1% q/q in the previous quarter. High inflation is taking its toll on consumers who are in turn dialing back on their consumption.

CAD

Retail sales form the month of June managed to increase by 0.1% m/m vs being flat as expected. Ex autos category plunged deeper with -0.8% m/m reading. Motor vehicles and parts were the biggest contributor to retail sales while furniture, electronics and appliances were biggest drag on the reading. Advanced reading for July sees retail sales rising 0.4% m/m suggesting strong start to the Q3.

This week we will have Q2 GDP reading.

Important news for CAD:

Friday:​

• GDP​

JPY

Preliminary August PMIs saw improvements across all three readings. Manufacturing ticked up to 49.7 from 49.6 in July while services printed a very strong 54.3, up from 53.8 the previous month. Composite was thus lifted to 52.6 from 52.2 in July. New orders and new export orders saw stronger growth for services sector while they showed weaker decline for manufacturing sector. Employment was unchanged for manufacturing while it started to grow for services sector. Output prices showed weaker inflation coming from manufacturing sector with stronger inflation coming from services sector. Input prices showed both sectors facing stronger inflation,

August CPI data for the Tokyo are showed signs of slowing down with headline number coming in at 2.9% y/y vs 3% y/y as expected and down from 3.2% y/y in July. Ex fresh food category came in at 2.8% y/y vs 2.9% y/y as expected and down from 3% y/y the previous month. Ex fresh food, energy component, the so-called core-core, remained unchanged at 4% y/y. BOJ maintains the stance that inflation is transitory and it will start to drop below targeted 2% from September/October. Yield on 10y rose to 0.684% during the week and there was no intervention.

CHF

SNB total sight deposits for the week ending August 18 came in at CHF476.2bn vs CHF484.8bn the previous week. SNB keeps selling USD and EUR in order to prop Swissy strength and fight off inflation.

This week we will have inflation data.

Important news for CHF:

Friday:​

• CPI​

 

[katetrades]

Forex Major Currencies Outlook (Sep 4 – Sep 8)

RBA and BoC meetings, ISM services PMI from the US, GDP data from Australia and Switzerland and employment data from Canada will dominate the week ahead of us. Please note that Monday is a holiday in the US so liquidity will be lower.

USD

Combination of two data points, consumer confidence plunging in August to 106.1 from 117 in July and JOLTS printing 8.827m in July vs downwardly revised 9.165m in June stirred talks about weakening of the US economy and sent USD down. Second reading of Q2 GDP was revised down to 2.1% from 2.4% which exacerbated USD selling.

PCE data for the month of July saw numbers come in line with expectations. Headline number was at 3.3% y/y vs 3% y/y in June while core number was 4.2% y/y, a tick up from 4.1% y/y the previous month. Core services ex housing component, this is closely watched by the Fed because it is more influenced by wages, rose 0.46% m/m, up from 0.3% m/m in June. Inflation pressures are creeping back. Personal income rose at a slower pace of 0.2% m/m vs 0.3% m/m the previous month while personal spending sped up increase to 0.8% m/m vs 0.5% m/m the previous month. Strong growth in personal spending boosts projections for higher Q3 GDP. Most banks now see Q3 GDP between 3 and 3.5% while Atlanta Fed GDP Now tracker sees it at 5.6%.

Headline NFP number for August came in at 187k vs 170k as expected and up from 157k in July. Private education and health services were the biggest job creating sectors while information and trade and transport saw biggest declines in jobs. There was a large jump in the unemployment rate which printed 3.8%, up from 3.5% the previous month. Part of it was due to jump in participation rate to 62.8% from 62.6% but part of it is for sure due to Fed’s fast rate increases. Additionally, average wages came in at 0.2% m/m and 4.3% y/y vs 0.4% m/m and 4.4% y/y the previous month. Average hours worked ticked higher to 34.4.

The yield on a 10y Treasury started the week and year at around 4.25%, fell to 4.04% and finished the week at around 4.18%. The yield on 2y Treasury reached the high of 5.11%. Spread between 2y and 10y Treasuries started the week at -85bp then tightened to -68bp. The 2y10y is has now been inverted for over a year. FedWatchTool sees the probability of a 25bp hike at September meeting at around 7% while probability of no change is at around 93%.

This week we will have ISM Services PMI.

Important news for USD:

Wednesday:​

• ISM Services PMI​

EUR

Spain CPI in July rose and printed 2.6% y/y as expected. It is a second consecutive month of increases in inflation. German CPI in August slipped to 6.1% y/y from 6.2% y/y in July while expectations were for a further decline to 6% y/y. German state inflation readings were mixed with majority states printing declines but some printing price increases. French CPI rose to 4.8% y/y vs 4.6% y/y as expected and up from 4.3% y/y the previous month. Preliminary Eurozone CPI was unchanged at 5.3% y/y while expectations were for a decline to 5.1% y/y. Much more optimistic data came in from the core CPI which fell to 5.3% y/y as expected from 5.5% y/y the previous month. Probabilities of a rate hike in September are declining. Additionally, member of ECB Governing Council Isabel Schnabel gave a more balanced view in her interview stating that although there are uncertainties around inflation outlook growth has decelerated. When a known hawk strikes a more balanced, less hawkish tone, markets pay much more attention and her words were interpreted as dovish for future rate hikes.

GBP

BoE Deputy Governor Broadbent came out with hawkish comments stating that inflation is likely to slow down slower and that monetary policy will need to remain in restrictive territory for some time. BoE Chief Economist Pill stated that monetary policy needs to be sufficiently restrictive for long enough period of time. He commented that job on inflation is not through, however that there is a possibility of doing too much in the fight against inflation. Dovishness starts to creep in as economy is in danger of slowing down while inflation remains high. Raising rates too high in this type of environment could be very dangerous. Final manufacturing PMI for August was revised up to 43 from 42.5, but still down from 45.3 in July indicating that bottom is not yet in for UK’s manufacturing sector.

AUD

CPI data for the month of July came in at 4.9% y/y vs 5.2% y/y as expected and down from 5.4% y/y in June. Although monthly reading does not measure prices of all goods that go into official quarterly measurement of CPI, this is still a very welcoming data point. This also cements no change to the cash rate at the RBA meeting next week. Private CAPEX rose 2.8% q/q vs 1.2% q/q as expected with great boost coming from new equipment and machinery. Investment in buildings and structures also improved greatly.

At the start of the week China’s Ministry of Finance announced that stamp duty on stock trades would be halved from 0.1% to 0.05%. This had immediate positive effect on Chinese stock markets and helped push AUD higher. Chinese banks have cut rates they pay on yuan deposits in order to stimulate investments into economy. Ultimately, PBOC will cut Forex Reserve Rate Ratio (RRR) to 4% from 6%. This decision will come into effect on September 15. The move is intended to free some USD liquidity, as banks now need to hold less USD than before, and use it to prevent yuan from falling further.

Official PMI data for the month of August saw improvement in manufacturing to 49.7 from 49.3. Slowly moving in the right direction and getting closer to the expansion level of above 50. New orders index has already edged into expansion with 50.2 with production index growing further into expansion. Non-manufacturing PMI missed expectations but it is still holding in expansion with 51. Expectations index is the main reason why Non-manufacturing is still in expansion with total orders and employment components printing below 50. Composite was propped up to 51.3 from 51.1 in July. Caixin manufacturing PMI returned into expansion with a 51 print vs 49.3 as expected.

This week we will have RBA meeting and trade balance data from China. No change to cash rate is expected. This will be Governor Lowe’s last meeting and from October he will be succeeded by current deputy Michele Bullock and she set bringing inflation down to the target as her top priority.

Important news for AUD:

Tuesday:​

• RBA Interest Rate Decision​

Wednesday:​

• GDP​

Thursday:​

• Trade Balance (China)​

NZD

Business confidence in August improved to -3.7 from -13.1 in July. The report jumps in export intentions and employment outlook. Both Inflation and pricing expectations continued to decline while residential construction saw the biggest improvement within surveyed sectors.

CAD

Q2 GDP data were abysmal. The reading printed a decline of 0.2% annualised vs increase of 1.2% as was expected. Previous quarter’s increase was revised down to 2.6% from 3.1. There was no growth in q/q while Q1 growth was revised down to 0.6% from 0.8%. A drop of 0.2% m/m in June pushed the Q2 reading in negative territory. Preliminary July GDP reading is now seen coming in flat indicating a slow start for Q3. BoC should stand pat next week after this reading.

This week we will have BoC meeting and employment data. Markets are mixed but are leaning more toward no change in the interest rate.

Important news for CAD:

Wednesday:​

• BoC Interest Rate Decision​

Friday:​

• Employment Change​
• Unemployment Rate​

JPY

During the weekend BoJ Governor Ueda stated in Jackson Hole: "We think that underlying inflation is still a bit below our target, this is why we are sticking with our current monetary easing framework." His dovish remarks kept JPY under pressure. Japanese government maintained its view on the economy in August stating that private consumption and business investments are picking up with industrial production showing signs of picking up. Employment shows movements of improvement while consumer prices are rising.

The unemployment rate in July jumped to 2.7% from 2.5% with job-to-applicant ratio slipping to 1.29. This is the highest level for the unemployment rate since February of 2022. Retail sales jumped 2.1% m/m, which is almost three times more than expected, after a decline of 0.4% m/m in June and rose 6.9% y/y after a 5.6% y/y increase the previous month.

CAPEX for the second quarter came in at 4.5% q/q vs 5.4% q/q and down from 11% q/q in the previous quarter. Company profits in Q2 soared to 11.6% q/q from 4.6% q/q in Q1. Reports are circling that government plans to extend subsidies on fuel. This will keep inflation lower. Yield on a 10y JGB reached a high of 0.66 and BoJ has not intervened in the markets.

CHF

SNB total sight deposits for the week ending August 25 came in at CHF471.4bn vs CHF476.2bn the previous week. SNB remains adamant in drawing down sight deposits and using them to purchase Swissy. Headline CPI in August remained steady at 1.6% y/y while it was expected for it to tick down to 1.5% y/y. More encouraging sign can be seen in core reading which dropped to 1.5% y/y from 1.7% y/y in July. SNB may opt for one more hike just to be sure at their September meeting but with inflation below 2% and moving down they can be satisfied with the job they have done so far.

This week we will have Q2 GDP data.

Important news for CHF:

Monday:​

• GDP​

 

[katetrades]

Forex Major Currencies Outlook (Oct 2 – Oct 6)

RBA and RBNZ meetings followed by potential NFP data, Canadian employment, ISM PMI and Swiss inflation will highlight the week ahead of us.

USD

Minneapolis Fed president Neel Kashkari published an essay in which he stated that there is a 60% chance of a soft landing with a 40% chance the Fed will have to continue hiking, possibly “significantly higher”. He expects that Fed will hold rates steady during 2024. USD has strengthened throughout the week and his words have provided a nice support for the dollar.

Durable goods for the month of August came in at 0.2% m/m vs -0.5% m/m as expected helped by downward revision to July reading. Core durable goods came in at 0.9% m/m vs 0.1% m/m as expected but there was also a revision down to July reading. Atlanta Fed GDP now remained unchanged at 4.9%. Final reading of Q3 GDP saw it come in unchanged at 2.1% annualised. However, the details are more concerning. Personal consumption was revised down to 0.8% from 1.8% thus making its contribution to 0.55pp from 1.14pp in second reading. With student loan repayments and government shutdown incoming this GDP component can fall further in Q4. Fixed investment was revised up and contributed 0.9pp while net exports were also revised up and contributed 0.04pp to the GDP reading.

PCE data for the month of August showed headline number ticking up to 3.5% y/y from 3.4% y/y in July. Core PCE has continued to decline coming in at 3.9% y/y, down from 4.3% y/y the previous month. Fed will be happy with the incoming data. Personal consumption and spending both came in at 0.4% m/m.

The yield on a 10y Treasury started the week and year at around 4.44%, rose to 4.65% and finished the week at around 4.52%. The yield on 2y Treasury reached the high of 5.15%. Spread between 2y and 10y Treasuries started the week at -68bp then tightened to -50bp as bear steepening of the curve continues. The 2y10y is has now been inverted for over a year. FedWatchTool sees the probability of a 25bp hike at November meeting at around 17% while probability of no change is at around 83%.

This week we will get ISM PMI data and should get NFP data on Friday. Headline number is expected to come at around 150k with the unemployment rate staying at 3.8%.

Important news for USD:

Monday:​

• ISM Manufacturing PMI​

Wednesday:​

• ISM Services PMI​

Friday:​

• NFP​
• Unemployment Rate​
• Average Hourly Earnings​

EUR

German Ifo survey for the month of September showed decline in current assessment, basically no change in business climate and improvement in expectations category. Business climate is at five year lows hinting at standstill for the economy.

Member of the ECB’s Governing Council Villeroy stated that risks of doing too much and too little on rates are now balanced. He added that oil prices need to be monitored as they can influence rising inflation expectations. He reiterated the message that rates should stay at this level (4% currently) for sufficiently long period of time. Positive growth is expected in 2024-25 and inflation should go down to 2% target by 2025.

Preliminary Eurozone inflation reading for the month of September saw a bigger than expected decline for the headline number as it printed 4.3% y/y, down from 5.2% y/y in August. A very encouraging sign for the ECB can be seen in core inflation reading which dropped to 4.5% y/y from 5.3% y/y the previous month. Preliminary inflation data from Spain came in at 3.5% y/y as expected, jumping almost a full percentage point from 2.6% y/y the previous month. Core inflation has declined to 5.8% y/y from 6.1% y/y making it the lowest print in last fifteen months. German CPI dropped to 4.5% y/y from 6.1% y/y in July. Base effects were the biggest reason for a drop. French CPI was unchanged at 4.9% y/y while expectations were for it to rise to 5.1% y/y.

GBP

Final reading of Q2 GDP saw economy growing by 0.2% q/q and 0.6% y/y. Q1 GDP was revised up to 0.3% q/q and 0.5% y/y from 0.1% q/q and 0.2% y/y. Services sector showed no growth while production sector increased by 1.2%. Household consumption in Q2 was revised down to show 0.5% growth from 0.7% as preliminary reported. Business investment jumped 4.1% while government consumption rose by 2.5%. Business confidence for September has slid to 36 from 41 in August.

AUD

Australian monthly inflation data for the month of August came in at 5.2% y/y as expected and up from 4.9% y/y in July. Headline monthly figure rose almost 0.7% while core rose 0.3% indicating that fight against inflation is not over which may prompt RBA to deliver more rate hikes. Rising oil prices (9.1% m/m) were the biggest contributor to the inflation. Rent increases continue to be strong rising 0.7% m/m.

This week we will have RBA meeting. Rising price pressures are turning RBA toward more tightening but we think that they will wait for official Q3 inflation data before deciding to make a move. Q3 CPI comes out late in October so we do not expect any change to monetary policy at this meeting.

Important news for AUD:

Tuesday:​

• RBA Interest Rate Decision​

NZD

September activity data published by ANZ showed continued improvement in business confidence to 1.5 from -3.7 in August. This is the first time that business confidence is in positive territory since May of 2021. Wage expectations continue to increase and are followed with increases in pricing intentions. Profit expectations are rising while inflation expectations are declining which is a great boon for the economy. On the negative side, export intentions and commercial construction are declining faster. Consumer confidence has also improved according to the ANZ survey.

This week we will have RBNZ meeting. No change in rate is expected but since we had some positive data we can expect a more hawkish message.

Important news for NZD:

Wednesday:​

• RBNZ Interest Rate Decision​

CAD

July GDP reading came in flat after increase of 0.2% m/m in June. Advanced reading for August is seen at 0.1%. Lackluster growth prospects caused CAD to be a laggard this week and make smaller gains compared to its peers. CAD rebounded a bit on Friday but still growth prospects are weighing it down.

This week we will have employment data.

Important news for CAD:

Friday:​

• Employment Change​
• Unemployment Rate​

JPY

BoJ Governor Ueda stated in his speech in Osaka that they will continue to patiently maintain easing policy. He stated that current stance has big stimulative effect on the economy but it can cause some unwanted side-effects. He emphasized uncertainty surrounding their base outlook and added that stable achievement of 2% inflation target is not yet in sight. Additionally, he clarified that they will not directly target forex in guiding monetary policy.

Tokyo CPI for September showed declines across the measures, but they remain elevated. Headline number came in at 2.8% y/y down from 2.9% y/y in August while ex fresh food category dropped to 2.5% y/y from 2.8% y/y the previous month. Ex fresh food, energy category, so-called core-core, slid to 3.8% y/y from 4% y/y in August. BoJ remains adamant that inflation will start falling from September/October period. The yield on a 10y JGB reached 0.77% which is the highest level in last ten years and BoJ will conduct unscheduled bond purchases starting next week.

CHF

SNB total sight deposits for the week ending September 22 came in at CHF475.1bn vs CHF473bn the previous week. Total sight deposits have been slowly rising for the entire month of September and with SNB leaving rates unchanged at 1.75% it seems that Swissy weakening is back on the table.

This week we will have inflation data.

Important news for CHF:

Tuesday:​

• CPI​

 

[katetrades]

Forex Major Currencies Outlook (Oct 9 – Oct 13)

Inflation data from the US and China combined with FOMC meeting minutes will dominate otherwise quiet week ahead of us. Over the weekend Hamas has launched surprise attack on Israel killing many innocent civilians, oil and gold should spike on market open. Please be mindful that increased volatility can be seen during the week.

USD

ISM manufacturing PMI in the month of September printed 49, up from 47.8 in August. The number is still below expansion level of 50, it has been there for eleven months, but positives are abound in this reading. Production rose to 52.5 and employment jumped back into expansion with 51.2 which is the highest reading since May. New orders and new export orders both improved with former coming at 49.2, close to the 50 level. Finally, prices paid component continued to decline and printed 43.8 vs 48.4 in August.

ISM services PMI for the month of September came in at 53.6 as expected, down from 54.5 in August. There was a big drop in new orders index, but it is still holding nicely in expansion. Employment index also fell, but by smaller amount. New export orders index continued to improve and is now sitting at 63.7 while backlog of orders posted a huge jump and almost returned into expansion. Prices paid component remained unchanged at 58.9 which is a concern considering inflation pressures coming in from the services sector.

Headline NFP number in September blew the roof off expectations. It came in at 336k while 170k was expected. There was no changes in the unemployment rate and participation rate (3.8% and 62.8% respectively). Average hourly earnings came in at 0.2% m/m, unchanged from August reading, but a tad weaker than 0.3% m/m as was expected while yearly figure slid to 4.2% from 4.3% the previous month. Chances of a November rate hike jumped after the report.

The yield on a 10y Treasury started the week and year at around 4.58%, rose to 4.89% and finished the week at around 4.78%. The yield on 2y Treasury reached the high of 5.21%. Spread between 2y and 10y Treasuries started the week at -48bp then tightened to -26bp as bear steepening of the curve continues. The 2y10y is has now been inverted for over a year. FedWatchTool sees the probability of a 25bp hike at November meeting at around 30% while probability of no change is at around 70%.

This week we will have September meeting minutes and inflation data. Headline inflation is expected to tick up on the back of rising oil prices while core inflation is expected to continue declining toward the 4% level.

Important news for USD:

Wednesday:​

• FOMC Minutes​

Thursday:​

• CPI​

EUR

Final Eurozone manufacturing PMI for September was unchanged at 43.4 with German reading being revised down and French reading being revised up. Output and employment components are declining. Demand for manufactured goods is on the decline. August unemployment rate came in at 6.4% y/y as expected and ticked down from 6.5% y/y in July. Final services for the Eurozone improved to 48.7 on the back of improvements across the board while German and Spain services readings returned into expansion. Composite reading improved to 47.2.

ECB Vice President de Guindos stated that it is premature to talk about rate cuts. ECB Chief Economist Philip Lane stated that service inflation is a big contributor to the overall number and that getting inflation down to 2% will not be as quick as getting it down to 4%. He added the key is to keep rates at current level for as long as needed and that they are data dependent. As yields on 10y bonds are rising rapidly around the world, yield on 10y German Bunds reached 3% level for the first time since 2011.

GBP

Final manufacturing PMI for the month of September showed a slightly bigger bounce from August low (44.3 vs 43). New orders, output and employment components recorded declines as weak demand for manufactured goods prevail. Due to declines in demand input prices are falling which will have positive impact on high inflation. The report shows that combination of lower costs and higher selling prices led to higher corporate margins. Services printed 49.3, much better than preliminary reported, but still down from 49.5 in August. There was a drop in new orders and employment categories but input costs rose at a slowest pace in almost two-and-a-half years. Composite printed 48.5, a tick down from 48.6 the previous month. BOE policymaker Broadbent stated that it is still up to debate whether there will be more rate hikes.

AUD

RBA has decided to leave the cash rate unchanged at 4.1% as was widely expected. This was the first meeting led by new Governor Michele Bullock. Inflation has passed its peak but remain elevated due to services and rents, central projection is for it to return to 2-3% targeted range by late 2025. Growth in first quarter was stronger than expected, but still below trend as is expected to continue. Uncertainties around growth remain significant. The statement concludes with “Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will continue to depend upon the data and the evolving assessment of risks. In making its decisions, the Board will continue to pay close attention to developments in the global economy, trends in household spending, and the outlook for inflation and the labor market.” A hawkish sounding message at the end, but markets continued to sell AUD.

Over the weekend Chinese PMI data were published and in the official data we can see manufacturing returning to expansion territory with 50.2 print while services PMI moved further into expansion with a 51.7 reading thus pushing composite to 52. Caixin PMI data missed expectations and dropped further with manufacturing printing 50.6 vs 51 in August while services recorded a bigger drop to 50.2 from 51.8 the previous month. Composite was dragged down to 50.9 from 51.7. China will be on holiday for the entire week. JP Morgan and Nomura analysts have revised China GDP growth up stating potential incoming targeted stimulative action.

This week we will have inflation and trade balance data from China.

Important news for AUD:

Friday:​

• CPI (China)​
• Trade Balance (China)​

NZD

RBNZ has left its Official Cash Rate (OCR) unchanged at 5.5% as was widely expected. Committee agreed that OCR needs to stay at restrictive level to constrain economic activity and keep inflation pressures in check. They acknowledged that Q2 growth was stronger than expected, the growth outlook remains subdued. The statement showed “There is a near-term risk that activity and inflation do not slow as much as needed.“ Inflation remains too high and Committee is determined to bring it down to 1-3% target range while maintaining maximum employment and that means that rates may need to remain at restrictive level for a more sustained period of time. Inflation is still expected to return to targeted range by the H2 of next year. The meeting and statement can be assessed as hawkish pause since there are no mention of cuts and doors are left open for additional rate hikes. The first GDT auction in October posted a great result as prices rose 4.4%. This makes it a third consecutive auction of rising dairy prices which should give Kiwi some support.

CAD

September employment report showed a strong addition of jobs to the tune of 63.8k vs 20k as expected. The unemployment rate remained at 5.5% while expectations were for it to tick up to 5.6%. Participation rate did tick up to 65.6% from 65.5% in August. Average hourly wages also ticked up to 5.3% y/y from 5.2% y/y the previous month. Full-time employment was at 15.8k while part-time employment was at 47.9k. Rising wages, more jobs added and higher participation all lead to higher chances of additional rate hike by BoC.

JPY

BoJ Tankan report for the Q3 showed that companies expect inflation to be higher than 2% target in five years. Consumer prices are seen rising 2.5% a year from now, 2.3% annual increase three years from now and 2.1% annual increase five years from now. The report shows improvements for both big manufacturers and non-manufacturers in September and December. Firms see USDJPY averaging 135.75 for Fiscal Year (FY) 2023/24 and EURJPY averaging 144.76 for FY 2023/24.

BoJ Summary of Opinions from September meeting sent a dovish tone. The minutes show that “even if the Bank were to terminate its negative interest rate policy, this can be considered as continuation of monetary easing if real interest rates remain negative”. It was said that timing of monetary policy changes cannot be stated now as it will depend on the incoming data. This puts BoJ in data dependent mode with other central banks. The summary also shows “Consumer prices are projected to continue rising in the next fiscal year”.

US JOLTS job openings for the month of August smashed expectations and came in at 9.61m vs 8.8m as expected. This data point pushed USDJPY over the 150 level and there was a fast intervention pushing the pair all the way down to 147. There was no confirmation of intervention from Japanese authorities. The yield on a 10y JBG reached the 0.8% level on Wednesday making it the highest since 2013.

Labour cash earnings rose by 1.1% y/y in the month of August vs 1.5% y/y expected increase. When we take inflation into account we see that real wages continued to decline and fell by 2.5% y/y. Household spending declined by 2.5% y/y vs expected decline of 4.3% y/y. High inflation is impacting real wages and consequently spending and with BoJ giving much attention to the wage growth we cannot expect any significant movements toward monetary tightening until situation with wages improves. MUFG has came out with opinion that negative rates policy can be abandoned as early as January of next year, but YCC will remain in place.

CHF

SNB total sight deposits for the week of September 29 came in at CHF476.3bn vs CHF475.1bn the previous week. Continuation of increases suggests that SNB is done with buying Swissy and is now leaning toward weakening it. Headline inflation for September ticked up to 1.7% y/y from 1.6% y/y in August, but expectations were for an increase to 1.8% y/y. On the other hand, core CPI declined further to 1.3% y/y from 1.5% y/y the previous month.​

 

[katetrades]

Forex Major Currencies Outlook (Oct 16 – Oct 20)

This week we will have a packed week with Q3 GDP data from China as well as consumption data from the US, the UK, Canada and China, on top of inflation data from the UK, Canada and New Zealand and employment data from the UK and Australia.

USD

FOMC minutes from the September meeting saw members express their opinion thusly: “Participants generally judged that, with the stance of monetary policy in restrictive territory, risks to the achievement of the Committee’s goals had become more two-sided.” Additionally, minutes show that all members agreed that policy should remain restrictive until they are confident that inflation is sustainably moving to their target. GDP for the Q4 should be restricted somewhat by strikes.

Fed Vice Chair Jefferson and President of Dallas Fed Logan stated the increases in long-end Treasury yields could potentially be doing tightening of monetary conditions that the Fed had been trying to achieve. These comments can be seen as dovish as they indicate that Fed will not need to hike as much as anticipated now that markets are actively assisting them in conducting monetary policy. San Francisco Fed President Mary Daly also stated that high yields have impact on future monetary policy decisions. She added that neutral rate may be higher than 2.5% as previously expected. Philly Fed President Harker stated that they are likely to be done with rate hikes.

Headline CPI for the month of September came in at 3.7% y/y, unchanged from August but a tick higher than expected at 3.6% y/y. Monthly increase was 0.4% vs 0.3% as expected. The report showed that energy component was the biggest contributor to the increase as oil prices rose significantly in September. Food continued to increase at 0.2% m/m pace. Used vehicles were the biggest drag on inflation falling 2.5% m/m followed by apparel which fell 0.1% m/m. Core rate came in at 0.3% m/m and 4.1% y/y as was expected. Shelter component came in hot at 0.6% m/m. Super core (services, ex-shelter and ex-energy) also continued to run hot and also rose by 0.6% m/m. USD was bid and Treasuries were sold as markets started pricing in a greater chance of a final rate hike in 2023.

The yield on a 10y Treasury started the week and year at around 4.64%, rose to 4.68% and finished the week at around 4.32%. The yield on 2y Treasury reached the high of 5.08%. Spread between 2y and 10y Treasuries started the week at -29bp then widened to -37bp as curve starts to flatten again. The 2y10y is has now been inverted for over a year. FedWatchTool sees the probability of a 25bp hike at November meeting at around 9% while probability of no change is at around 91%.

This week we will have consumption data.

Important news for USD:

Tuesday:​

• Retail Sales​

EUR

ECB policymaker Kazaks, Governor of Central Bank of Latvia, stated that ECB is done with rapid rate hikes and added that any possible future rate hikes will be relatively small. ECB Vice President de Guindos stated that inflation is expected to continue falling in the coming months, but there is a risk of higher oil prices tempering with orderly decline and added that current level of rates should contribute to price stabilisation. French Central Bank President Villeroy stated that rates are on a good level and added that at this stage, further rate hikes are not the right thing to do. New projection for 12-month CPI by ECB has been raised to 3.5% from 3.4% as seen in July. Projection from 3-year was raised to 2.5% from 2.4% as was projected three months ago.

GBP

August GDP number came in at 0.2% m/m as expected and presented a nice rebound from -0.6% m/m seen in July. The services sector grew by 0.4% while both production and construction sectors contracted. BoE Chief Economist Pill stated that it is now a matter of fine balancing whether they need to raise rates higher adding that there is a lot of tightening from rate hikes yet to be felt in the markets. BoE Governor Bailey commented on how tight the previous voting was and that future votes on rate hikes will be tight as well. He added that rates are restrictive as it is needed for the current inflationary environment.

This week we will have employment, inflation and consumption data.

Important news for GBP:

Tuesday:​

• Claimant Count Change​
• Unemployment Rate​

Wednesday:​

• CPI​

Friday:​

• Retail Sales

AUD

RBA Assistant Governor Kent reiterated that further tightening may be required adding that already done monetary policy tightening is bringing growth, demand and inflation down. Lags in the transmission of monetary policy are problematic. He added that pause gives them chance to assess effects of current tightening on the economy and that if they do decide to sell bonds they will do it in such a way as to not disturb the market.

September inflation data from China saw it increase 0.2% m/m vs 0.3% m/m as expected and thus stay flat for the year vs expected increase of 0.2% y/y. Food prices declined 3.2% and were the biggest drag on inflation. PPI continued to improve for the third straight month and printed -2.5% y/y vs -3% y/y the previous month. Trade balance data saw surplus widen to $77.7bn from $68.3bn in August with both exports and imports coming in at -6.2% y/y which represents improvement from falling by -8.8% y/y and -7.3% y/y the previous month respectively.

This week we will have employment data from Australia as well as Q3 GDP data, production and consumption data from China.

Important news for AUD:

Wednesday:​

• GDP (China)​
• Industrial Production (China)​
• Retail Sales (China)​

Thursday:​

• Employment Change​
• Unemployment Rate​

NZD

RBNZ Governor Orr reiterated bank’s stance that rates will need to stay at restrictive levels for foreseeable future. He stated that it is necessary to keep them there in order for bank to reach its inflation target of 1-3%. Electronic card retail sales, a good proxy to the official quarterly retail sales, fell in September 0.8% m/m. Yearly number is still positive with a 1.6% y/y print, but much weaker than 4.2% y/y print in August.

This week we will have Q3 inflation data.

Important news for NZD:

Monday:​

• CPI​

CAD

Building permits rebounded in August and came in at 3.4% m/m vs 0.5% m/m as expected after a drop of 3.8% m/m in July. CAD has suffered from risk off mode in markets and gave up most of its gains against USD. BoC Governor Macklem stated that they do not expect recession and added that "Higher long-term bond yields are not a substitute for down what needs to be done to get inflation back down to target". His message has differed from Fed's and it was clearly hawkish giving CAD some new strength as markets start to price in bigger chance of further 25bp rate hike.

This week we will have inflation and consumption data.

Important news for CAD:

Tuesday:​

• CPI​
• Retail Sales​

JPY

Japanese media reports that BoJ is considering moving its inflation outlook for the current fiscal year to 3% from 2.5% that was projected in July. The report states that main reason for such a move would be rising oil prices and weak JPY. There are also reports that government is considering fuel subsidies to help its citizens with escalating energy prices. Core machinery orders, a good proxy for Capex spending, continued to decline in August and missed expectations. The numbers came in at -0.5% m/m vs 0.4% m/m as expected and -7.7% y/y vs -7.3% y/y as expected.

CHF

SNB total sight deposits for the week ending October 6 came in at CHF479.9bn vs CHF476.3bn the previous week. Another week of rising sight deposits indicates that SNB is buying EUR and USD.​

 

[katetrades]

Forex Major Currencies Outlook (Oct 23 – Oct 27)

RBA and BoC meetings, coupled with preliminary Q3 GDP from the US and preliminary October PMI data from the Eurozone and the UK as well as inflation data from the US and Australia will highlight the busy week ahead of us. Additionally, we will get Q3 earnings from Microsoft, Alphabet, Meta and Amazon.

USD

September retail sales report was a strong one and reminder that we should never underestimate the strength of American consumer. All four key readings beat expectations and previous month’s readings were revised up. Headline number came in at 0.7% m/m. Ex autos category as well as ex autos and gas and control group, which excludes all volatile categories and is used for GDP calculation all increased by 0.6% m/m. Retail sales have been increasing for the past 6 months and they will give boost to Q3 GDP reading next week. Additionally, they will cause Fed to consider whether monetary policy conditions are tight enough.

Fed Chair Powell stated that economy is resilient and has consistently surprised to the upside. He added that rise in yields might lower the need for future rate hikes. Basically bond market is doing Fed’s job and tightens financial conditions by raising yields. On the rising yields he commented that the rise does not appear to be due to expectations for higher inflation or further Fed rate hikes. “It’s really happening in term premiums, which is the compensation for holding long-term securities, and not principally a function of the market looking at near term fund rates,” Fed is completely data dependent and in wait and see mode. Markets interpreted his speech as dovish leaning.

The yield on a 10y Treasury started the week and year at around 4.62%, reached the 5% level and finished the week at around 4.91%. The yield on 2y Treasury reached the high of 5.26%, the level not seen since 2006. Spread between 2y and 10y Treasuries started the week at -44bp then tightened to -14bp as curve resumed its bear steepening trend. The 2y10y is has now been inverted for over a year. FedWatchTool now sees the probability of a 25bp CUT at November meeting at around 2% while probability of no change is at around 98%.

This week we will have preliminary Q3 GDP reading which is expected to come north of 4% and Fed’s preferred inflation data, PCE.

Important news for USD:

Thursday:​

• GDP​

Friday:​

• PCE​

EUR

German ZEW survey for October saw current conditions deteriorate less than expected and print -79.9 vs -79.4 in September. Positives can be seen in the economic sentiment which improved to -1.1 from -11.4 the previous month indicating that investors think that worst is behind us and that future will be brighter. Economic sentiment for the Euro area returned into positive territory as it printed 2.3 vs -8.9 in September. Final inflation reading for September was unchanged with headline at 4.3% y/y and core 4.5% y/y.

This week we will have preliminary October PMI data and ECB meeting. This meeting should act as a bridge meeting for December one where we will get new staff projections. Therefore, markets and we see no change to interest rates. Further tightening could be conducted by advancing the end of PEPP reinvestments.

Important news for EUR:

Tuesday:​

• S&P Global Manufacturing (Eurozone, Germany, France)​
• S&P Global Services (Eurozone, Germany, France)​
• S&P Global Composite (Eurozone, Germany, France)​

Thursday:​

• ECB Interest Rate Decision​

GBP

We got only partial employment data this week. Payrolls change for September dropped 11k vs flat as expected and August reading was revised down to show a drop of 8k. Wages data showed decline as average weekly earnings for August came in at 8.1% 3m/y vs 8.3% 3m/y and 8.5% 3m/y in July. Average weekly earnings excluding bonus came in at 7.8% 3m/y as expected and a tad weaker than 7.9% 3m/y the previous month. BoE can feel a bit of relief that wages were softer but increases are still very high. September inflation data saw headline CPI remain unchanged at 6.7% y/y while a small drop to 6.6% y/y was expected. Motor fuel prices were the biggest contributor to the reading. There was a decline in food prices making it the first such m/m decline in two years Core CPI did tick down to 6.1% y/y from 6.2% y/y in August, but expectations were for it to drop to 6% y/y. Chancellor of Exchequer Hunt commented on inflation and stated that it rarely comes down in straight line but it is still expected that it should continue declining toward the year end. BoE is primarily interested in services inflation and it ticked up to 6.9% y/y from 6.8% y/y in August. These readings will not sway BoE towards one way or another so we may see one more tight meeting with markets leaning more towards no change.

This week we will have preliminary October PMI readings and remaining jobs data.

Important news for GBP:

Tuesday:​

• S&P Global Manufacturing​
• S&P Global Services​
• S&P Global Composite​
• Unemployment rate​

AUD

RBA minutes from October meeting surprised markets as they showed that board debated between a 25bp rate hike and no change. In the end no change to rate hike prevailed as a stronger case. Minutes also show that upside risks to inflation present a “significant concern” as well as that boar has “low tolerance” for slow return of inflation towards the target. Minutes also showed concern about rising house prices and their potential to spur up consumption which may signal that policy is not restrictive enough. Minutes showed decent amount of concerns that board members had and they overall struck a more hawkish tone.

September jobs report was a weak one. Employment change came in at 6.7k vs 20k as expected. The unemployment rate slid to 3.6% from 3.7% in August but the main culprit was big drop in participation rate to 66.7% from 67% the previous month. Looking further into employment numbers we can see that full-time employment dropped by 39.9k so all of the gains in jobs report were from added part-time jobs.

Q3 GDP number saw economy grow 1.3% q/q vs 1% q/q as expected. On a yearly basis growth was 4.9% vs 4.4% as expected. Economy outperformed expectations but the yearly figure is weaker than it was in Q2. GDP has caused many analysts to revise China’s 2023 GDP higher than previously thought. Industrial production grew by 4.5% y/y in September, unchanged from August reading while retail sales rose 5.5% y/y, up from 4.6% y/y the previous month. Both readings came in stronger than expected. PBOC has left 1-year MLF rate unchanged at 2.5% as was widely expected. Loan Prime Rates (LPR) were also left unchanged with 1-year at 3.45% and 5-year at 4.20%.

This week we will have Q3 inflation data.

Important news for AUD:

Wednesday:​

• CPI​

NZD

In the elections held over the weekend Christian Luxon the leader of the National Party became the new Prime Minister. The party managed to secure enough votes so it can create a conservative leaning government with right-wing ACT party. Q3 CPI data saw quarterly number increase less than expected (1.8% vs 2%) while yearly figure fell more than expected (5.6% vs 5.9%). Q2 has printed 1.1% q/q and 6% y/y. RBNZ sectoral model, their preferred measure of inflation, declined to 5.2% y/y from 5.7% y/y in the previous quarter. Improvement in yearly figure and drop in sectoral model will release some of the pressure on RBNZ to continue raising rates. Although inflation remains very high, ANZ now predicts that next rate hike will come in February of next year instead of November of 2023. GDT auction saw prices increase by 4.3%. This is the fourth consecutive auction of rising prices which could add some tail wind to Kiwi.

CAD

Headline CPI for the month of September declined to 3.8% y/y from 4% y/y in October as it declined 0.1% m/m compared to increase of 0.4% m/m as seen the previous month. Declines were located in some travel-related services as well as in durable goods and groceries. A big decline in prices was seen in airfares. Increases in prices were seen for gasoline. Core measures all recorded declines in inflation with median falling below 4% with 3.8% y/y print, common at 4.4% y/y and trim at 3.7% y/y. Inflation coming down will make BoC reconsider their hawkish stance and may lead them to pause at next week’s meeting.

This week we will have BoC meeting. With inflation cooling down and growth prospects looking weak BoC may opt to leave rates unchanged despite the strong October employment report.

Important news for CAD:

Wednesday:​

• BoC Interest Rate Decision​

JPY

Report in the media showed that Japanese trade union plans to ask for more than a 5% increase at wage negotiations in spring of 2024. This is meant to help workers cope with rising living costs due to high inflation. The yield on 10y JGB reached 0.86% during the week. That level has not been seen in ten years. Trade balance returned into surplus in the month of September as exports rose to highest level in history according to the Ministry of Finance. Exports to the US also printed their highest value ever. Continually declining JPY is a great boost for the exporters, making Japanese goods cheaper and results are clearly seen.

CHF

SNB total sight deposits for the week ending October 13 came in at CHF483.8bn vs CHF479.9bn the previous week. SNB is selling EUR and USD and sight deposits have been rising every week since the start of September.​

 

[katetrades]

Forex Major Currencies Outlook (Oct 30 – Nov 3)

We will have a massive week that will feature Fed, BoE and BoJ meetings, Treasury Refunding Announcement, employment data from the US, New Zealand and Canada, inflation data from Eurozone and Switzerland, PMI data from the US and China as well as preliminary Q3 GDP reading from the Eurozone.

USD

Q3 GDP came in scorching hot at 4.9% annualised vs 4.3% annualised as expected. Personal consumption made a great bounceback as it contributed with 2.69%, more than a half, to the final GDP reading, compared to just 0.55% contribution in the previous quarter. Gross fixed investment added 0.15%, government consumption added 0.79% while net exports were a drag and subtracted 0.07% from the GDP reading. Inventories added 1.32%. Atlanta Fed GDPNow sees Q4 GDP at 2.3%.

September PCE data came in line with expectations. Headline number came in at 3.4% y/y unchanged from August while core PCE dropped to 3.7% y/y from 3.9% y/y the previous month. There was an uptick in core PCE reading m/m as it came in at 0.3% compared to 0.1% in August. Personal spending rose 0.7% m/m showing the strong consumer as was evident in Q3 GDP reading while personal income increased by 0.3% m/m.

The yield on a 10y Treasury started the week and year at around 4.93%, rose to around 5.02% level and finished the week at around 4.82%. The yield on 2y Treasury reached the high of 5.15%, the level not seen since 2006. Spread between 2y and 10y Treasuries started the week at -16bp then tightened to -14 bp as curve resumed its bear steepening trend. The 2y10y is has now been inverted for over a year. FedWatchTool now sees the probability of a 25bp cut at November meeting at around 2% while probability of no change is at around 98%.

This week we will have ISM PMI data, Fed meeting, employment data and Treasury Refunding Announcement (TRA). With yields running wild due to over supply of Treasuries the TRA may draw more attention than the Fed meeting where no change to rate is certain. We will have a ton of employment data throughout the week with Employment Cost Index, JOLTS and ADP, culminating with NFP on Friday. Headline number is expected around 190k with the unemployment rate remaining at 3.8%.

Important news for USD:

Wednesday:​

• Treasury Refunding Announcement​
• Fed Interest Rate Decision​
• JOLTS​
• ISM Manufacturing PMI​

Friday:​

• NFP​
• Unemployment Rate​
• ISM Services PMI​

EUR

Preliminary October PMI data painted a picture of a declining economy. Manufacturing came in at 43 vs 43.7 as expected and down from 43.4 in September. German reading improved and beat expectations but French reading slumped hard. Services slumped to 47.8 from 48.7 in September (48.7 was expected) printing the lowest reading since February of 2021. German reading fell into contraction while French reading improved. Composite reading printed 46.5, lowest since November of 2020, with German reading declining and French reading improving. The economy is off to a dreadful start of Q4 with report stating that both Germany and France are in big downturn when it comes to manufacturing while France is faring a bit better in services sector.

ECB has left key interest rates unchanged as was expected. Incoming data has been broadly in line with assessment of medium-term outlook. Inflation is expected to remain too high for too long. There are signs that previous rate hikes are causing tighter financial conditions and in turn dampen demand. ECB remains data dependent in regards to future rate hike decisions. ECB President Lagarde stated in the press conference that they did not talk about rate cuts or changes to the PEPP and that now is not the time for forward guidance but for data-dependent approach. She characterized economy is weak and said that it will stay weak until the end of the year.

This week we will have preliminary Q3 GDP and preliminary October CPI data.

Important news for EUR:

Tuesday:​

• CPI​
• GDP​

GBP

August unemployment rate has ticked down to 4.2% from 4.3% in July while employment change saw a drop of 82k jobs in the past three months, a stark improvement from a 207k jobs reported previous month. It is important to note that these numbers have been adjusted to reflect lower sample sizes and their usefulness for making decisions is less reliable.

Preliminary PMI data for the month of October reinforce the view that manufacturing sector bottomed out in August. October printed 45.3 up from 44.3 in September for the second consecutive month of increases. Services ticked down to 49.2 from 49.3 while composite was propped up by manufacturing to 48.6 from 48.5 the previous month. UK economy is off to a sluggish start as well, but fares better than the EU economy. The report shows that “Encouragingly, cost pressures have continued to moderate, in part helped by reports of lower wage inflation and further falls in prices charged by manufactures. However, selling price inflation for services remains somewhat elevated, and even ticked higher in October, pointing to some stickiness of headline inflation around the 4% mark into the early months of next year.” The report then added “In this context, any upward inflation pressures due to higher oil prices will be a major concern, meaning it would be unlikely for policymakers to rule out the possibility of rates rising again later in the year.”

This week we will have BoE meeting. It maybe another close meeting but we see the chances of yet another pause prevailing.

Important news for GBP:

Thursday:​

• BoE Interest Rate Decision​

AUD

We got an inflation shock from Australia as all of the inflation measures in Q3 came in higher than expected. Headline number came in at 1.2% q/q vs 1.1% q/q as expected and up from 0.8% q/q in the previous quarter. Yearly figure came in at 5.4% which is lower than 6% in Q2, but it was a smaller drop than expected (5.3%). RBA Trimmed Mean CPI (core CPI) also rose 1.2% q/q vs 1.1% q/q as expected and it rose 5.2% y/y vs 5% y/y as expected. RBA is specifically targetting 2-3% in core CPI and since it was down from 5.9% y/y in Q2 it prompted Treasurer Chalmers to comment that inflation is moderating but that it is persistent. RBA Governor Bullock gave a rather dovish message when she said that inflation came in higher than expected but right where they thought it will be and said that they are still considering if this inflation print made a “material” change to the outlook. She added that job on rate hikes is not done yet. With inflation regaining upward momentum markets are now pricing in a rate hike in November.

This week we will have official and Caixin PMI data from China.

Important news for AUD:

Tuesday:​

• Manufacturing PMI (China)​
• Services PMI (China)​
• Composite PMI (China)​

Wednesday:​

• Caixin Manufacturing PMI (China)​

Friday:​

• Caixin Services PMI (China)​
• Caixin Composite PMI (China)​

NZD

This was yet another hard week for Kiwi. It was pushed down against the other pairs but managed to find some footing against the USD and possibly carve a bottom.

This week we will have Q3 employment data.

Important news for NZD:

Tuesday:​

• Employment Change​
• Unemployment Rate​

CAD

BoC has left rate unchanged at 5% as was widely expected. Members see clear signs that monetary policy has positive effects on moderating spending and easing price pressures. The new projections see GDP at 1.2% in 2023 vs 1.8% previously, 0.9% in 2024 vs 1.2% previously and 2.5% in 2025 vs 2.4% as seen in July. CPI has been adjusted higher for all three years and is now seen at 3.9% for 2023, 3% for 2024 and 2.2% for 2025. Inflation is now seen reaching 2% by the end of 2025 vs by mid-2025 as projected in July. BoC statement repeated that they are prepared to further increase interest rates if needed. BoC Governor Macklem stated that inflation is on a higher path than expected adding that overall inflation risks have increased since July. He added that pause at this meeting leaves time for monetary policy to continue cooling the economy and that although a lot of progress has been made, they are not at the finish line.

This week we will have employment data.

Important news for CAD:

Friday:​

• Employment Change​
• Unemployment Rate​

JPY

Preliminary PMI data for the month of October showed manufacturing unchanged at 48.5 while services dropped to 51.1 from 53.8 in September. This in turn has dragged composite into contraction territory of 49.9 for the first time this year. Output, new orders and new export orders showed stronger declines for manufacturing sector and weaker growth for the services sector. Both input and output prices for both sectors showed weaker inflation while future output has weaker positive outlook across the sectors.

The yield on a 10y JGB has risen to 0.86% as rumors spread that BoJ may tweak its Yield Curve Control at next week’s meeting. BoJ held unscheduled bond buying operation on Wednesday while government plans to extend fuel and utility price subsidies until April of 2024. Also on Wednesday USDJPY finally broke the 150 level.

This week we will have BoJ meeting. No changes to rate are expected but rumors regarding widening or full abandoning of Yield Curve Control may materialize.

Important news for JPY:

Tuesday:​

• BoJ Interest Rate Decision​

CHF

SNB total sight deposits for the week ending October 20 came in at CHF478.8bn vs CHF483.8bn the previous week. Geopolitical risks are keeping Swissy bid so the SNB can be on the sidelines as there is no point in fighting the battle against safe haven flows.

This week we will have inflation data.

Important news for CHF:

Thursday:​

• CPI​

 

[katetrades]

Forex Major Currencies Outlook (Nov 6 – Nov 10)

After an intense week behind us the week ahead of us will give us time to digest new information and make informed decisions. Weak ahead of us will feature RBA meeting, a 25bp rate hike is expected and preliminary Q3 GDP reading from the UK.

USD

ISM manufacturing PMI for the month of October slumped deeper into contraction to 46.7 from 49 in September. Employment and new orders components fell hardest with former dropping into contraction. Additionally, prices paid component rose indicating that inflation is not defeated. Positives are drop in inventories and increase in new export orders.

Fed meeting brought us no change as expected. The rate is still in the range of 5.25-550%. The statement showed almost no changes to the September one, it was emphasized that economic activity in Q3 expanded at a stronger pace and that “tighter financial and credit conditions” will put some brakes on the economy. Chairman Powell stated that Fed is proceeding carefully, adding that economy expanded well above expectations and that full effects of monetary policy are yet to be felt. He reiterated that they are data dependent and that decisions will be made on meeting-by-meeting basis. During the press conference he stated that they are aware of moves in the longer-term yields and that they can have implications on monetary policy but they need to be persistent. Powell stated that there are not thinking nor talking about rate cuts.

The Treasury lowered estimate for Q4 borrowing to $776bn from $852bn as was suggested in July. Additionally, Quarterly Refunding Announcement showed that they have altered the duration as they will be issuing more shorter-term bonds. This report combined with impression of Fed being done with rate hikes and Powell’s perceived dovish tones led to jump in bonds and risk assets and drop in USD.

After a long streak of beating the expectations NFP finally succumbed in October and came in at 150k vs 180k as expected. The unemployment rate ticked higher to 3.9% while participation rate ticked down to 62.7%. Wages were mixed as they rose 0.2% m/m vs 0.3% m/m as expected and 4.1% y/y vs 4% y/y as expected, but they were lower compared to September reading. Overall, this report shows that Fed’s tightening is producing results and that there is no need for future rate hikes.

ISM services PMI for the month of October recorded a significant miss as it came in at 51.6 vs 53 as expected and down from 53.6 in September. Employment index barely managed to avoid falling into contraction while new export orders plunged heavily as they fell from 63.7 in September to 48.8. Prices paid eased negligibly while new orders posted a healthy gain representing positives to the otherwise weak report.

The yield on a 10y Treasury started the week and year at around 4.84%, rose to around 4.94% level, then fell to 4.48 post NFP and finished the week at around 4.53%. The yield on 2y Treasury reached the high of 5.10%. Spread between 2y and 10y Treasuries started the week at -17bp then widened post NFP and finished the week at -35p as curve inverted further. The 2y10y is has now been inverted for over a year. FedWatchTool now sees the probability of a 25bp raise at December meeting at around 10% while probability of no change is at around 90%.

EUR

Preliminary October inflation data for the Eurozone saw it dropping to 2.9% y/y vs 3.1% y/y as expected and all the way down from 4.3% y/y in September. Headline inflation is now at the lowest level in two years as base effects caused inflation to plunge. Core CPI came in at 4.2% y/y as expected and down from 4.5% y/y the previous month. Spain CPI 3.5% y/y as expected and unchanged. German inflation dropped to 3.8% y/y from 4.5% y/y while expectations were for a drop to 4% y/y. Monthly reading was flat. Price drops are due to base effects in energy and food, but there are also drops in tourism and hospitality sectors which reflect drop in demand now that summer holidays are over. French inflation dropped to 4% y/y as expected from 4.9% y/y with food and energy prices leading the way in declines.

Preliminary Q3 GDP for the Eurozone showed a contraction of 0.1% q/q. German Q3 GDP came in at -0.1% q/q vs -0.3% q/q as expected and -0.3% y/y. French Q3 GDP came at 0.1% q/q as expected and 0.7% y/y. Household consumption grew 0.7% in Q3 vs being flat in Q2. Net exports were the biggest drag on French Q3 GDP reading with inventories also contributing negatively. Spanish GDP was a bright spot, rising 0.3% q/q while Italian was flat.​

GBP

BoE has left the rate unchanged at 5.25% as was expected. The vote was 6-3 with three members (Greene, Haskel and Mann) voting for a 25bp rate hike. The statement showed that rates will need to be restrictive for a prolonged period of time. Projection is for Q3 to be flat and to print 0.1% in Q4. Governor Bailey stated that inflation is still too high and that there is still a long way to go on taming inflation. Regarding GDP, he stated that incoming weaker than expected readings will not have impact on monetary policy decisions. There was a push back on rate cuts, as Governor Bailey commented that it is “too early” to talk about rate cuts, same as Powell stating that “monetary policy will need to be sufficiently restrictive for sufficiently long".

This week we will have preliminary Q3 GDP data.

Important news for GBP:

Friday:​

• GDP​

AUD

All three of the official PMI data for the month of October from China missed expectations and came in lower than previous month. Manufacturing even fell back into contraction as it printed 49.6. Non-manufacturing declined to 50.6 and helped keep composite in expansion with 50.7 but down from 52 in September. Caixin manufacturing also dropped into contraction with 49.5 reading. Weaker foreign demand has caused new export orders to plunge. Caixin services managed to come at 50.4 vs 50.2 in September, but they were much weaker than expected (51.2). This has caused composite to barely stay in expansion with a 50 reading. New orders increased at the weakest pace in last ten months, foreign demand weakened with business optimism continuing to decline. Prices paid increased as companies are passing higher costs to consumers.

This week we will have RBA meeting as well as trade balance and inflation data from China. RBA is expected to raise interest rates by 25bp, even IMF has urged them to do so.

Important news for AUD:

Tuesday:​

• RBA Interest Rate Decision​
• Trade Balance (China)​

Thursday:​

• CPI (China)​

NZD

Business confidence posted a huge jump in October as it printed 23.4 vs 1.5 in September. Export, investment and employment intentions all recorded big jumps with employment showing a big drop in construction but big jump in manufacturing. Inflation expectations remain unchanged and at a very high levels of almost 5%. Q3 employment report was a soft one as it showed employment change declining 0.2% q/q and the unemployment rate jumping to 3.9% from 3.6% in Q2. Participation declined to Q1 level of 72%. Hourly wages rose by 6.7% compared to 6.9% increase in Q2 indicating that wage-price spiral is missing and that RBNZ is not in the rush to continue raising interest rates.

CAD

Employment report for the month of October showed employment change of 17.5k vs 22.5k as expected. The unemployment rate jumped to 5.7% from 5.5% previous month while participation rate was unchanged at 65.6%. Wages are showing signs of cooling as they increased 5% y/y compared to 5.3% y/y in September. Additional weakness can be found in composition of jobs added as all of the jobs added are part-time jobs (20.8k) while full-time jobs recorded a decline of (3.3k) jobs. August GDP came in flat vs 0.1% m/m as expected. July GDP was also flat and preliminary data indicates that September GDP number will also be flat. That will make Q3 GDP flat as well.

JPY

On Monday Nikkei reported that BoJ is considering tweaking Yield Curve Control so it allows the yield on 10y JGB to go above 1%. This gave JPY a boost as it strengthened over 50 pips in five minutes against all majors. Then at the BoJ meeting it was stated that 1% will formally be the upper bound for 10y JGB yield. Markets were not happy with this, as they saw it for what it is, a continued monetary easing policy by BoJ and USDJPY quickly returned above the 150 level. There was no change to the rate, it remained at -0.10%. Inflation forecast has been revised up and it now stands at 2.8% for Fiscal Year (FY) 2023, it was at 2.5% in July, 2.8% for FY 2024, it was at 1.9% in July and 1.7% for FY 2025, it was 1.6% previously. GDP projection was improved to 2% for FY 2023 from 1.3% in July while FY 2024 was downgraded to 1% from 1.2% in July. GDP forecast for FY 2025 was left unchanged at 1%. BoJ announced they will stop with daily fixed-rate bond purchases. This should give more room for markets to the decide the rate, perhaps even letting yield rise above 1% before he bank steps in.

At the press conference BoJ Governor Ueda reiterated bank’s readiness to ease further if necessary and mentioned that sustainable price increases are not there. He emphasized importance of next spring’s wage negotiations (Shunto) for inflation outlook and stated that he does not believe that yields on long-term bonds will breach 1% level. The yields on 10y JGB reached the high of 0.965%.​

CHF

SNB total sight deposits for the week ending October 27 came in at CHF472.1bn vs CHF478.8bn the previous week. This is the second consecutive week of falling deposits and they are now back at the levels seen six weeks ago. SNB has announced changes to sight deposit remuneration scheme. The main goal of the change is to bring and maintain Swiss Average Rate Overnight (SARON) to the monetary policy rate which currently sits at 1.75%. Headline inflation for October was unchanged at 1.7% y/y while core CPI rose 1.5% y/y vs 1.3% y/y in September. The increase in core can be a bit of concern but both readings are well bellow targeted 2%.​

 

[katetrades]

Forex Major Currencies Outlook (Nov 13 – Nov 17)

The week ahead of us will have inflation data from the US and the UK, employment data from the UK and Australia, consumption data from the US and China as well as preliminary Q3 GDP from Japan.

USD

Senior Loan Officer Opinion Survey, conducted by the Fed, showed that lending conditions continue to tighten. Additionally, households and businesses showed lower demand for credit. If credit stops flowing freely through the system it will have negative impact on growth and that in turn will lead to lower demand which should bring inflation down. Precisely what Fed intended to happen with their rate hikes.

Fed Chairman Powell spoke at the IMF meeting and stated clearly that they are not confident that they have achieved sufficiently restrictive policy adding that if it becomes necessary to tighten further “we will not hesitate”. Hawkish rhetoric from Powell added fuel to USD and pushed back on markets’ dovish pricing. Powell’s speech was interrupted by climate activists and in the audio he can be heard dropping an f-bomb. In the Q&A section he stated that economy has been stronger than expected but that it should come down in the coming quarters.

The yield on a 10y Treasury started the week and year at around 4.55%, rose to around 4.67% level, then fell below 4.50% and finished the week at around 4.61%. The yield on 2y Treasury reached the high of 5.05%. Spread between 2y and 10y Treasuries started the week at -28bp then widened to -40p as curve inverted further. The 2y10y is has now been inverted for over a year. FedWatchTool now sees the probability of a 25bp raise at December meeting at around 10% while probability of no change is at around 90%.

This week we will have inflation and consumption data.

Important news for USD:

Tuesday:​

• CPI​

Wednesday:​

• Retail Sales​

EUR

Final services reading for the month of October for the Eurozone was unchanged from preliminary reading at 47.8, a drop from 48.7 in September. Spanish and French readings improved with former moving further in expansion with 51.1 print while Italian and German readings declined compared to September with former heavily missing on expectations while former managed to improve slightly from the preliminary reading. Composite for Eurozone came in at 46.5 vs 47.2 the previous month. The report shows that Eurozone started Q4 on a very weak note and there are no signs of improvement in the near-term.

ECB Chief Economist Phillip Lane stated that drops in underlying inflation pressures are welcomed but they are not enough. Progress has been made in pushing them down but that there is still room for more. He added that balance sheet will need to be shrinked but it will have to be at levels higher than those seen in its early years. ECB September survey of consumer expectations saw median expectations for one year rise to 4% from 3.5% previously. The reading is highest since April and with inflation expectations moving in undesired direction ECB will be pressed to revisit their monetary policy stance.

This week we will have second reading of Q3 GDP.

Important news for EUR:

Tuesday:​

• GDP​

GBP

Preliminary Q2 GDP reading printed flat on quarter and 0.6% y/y. Details show that construction increased 0.1% while services sector declined 0.1% with production coming in flat. On the expenditure side details were abysmal. Household consumption declined 0.4%, government expenditure declined 0.5% while business investment plunged -4.2% while adding 4.1% in the previous quarter. Net trade showed surplus of 0.7% GDP as exports increased 0.5% and imports declined -0.8%.

This week we will have employment and inflation data.​

Important news for GBP:

Tuesday:​

• Employment Change​
• Unemployment Rate​

Wednesday:​

• CPI​

AUD

RBA has delivered another 25bp rate hike as expected bringing thus cash rate to 4.35%, the level not seen in the last 12 years. Inflation has passed its peak but remains too high. Inflation is coming down slower than expected and new projections see it at 3.5% by the end of 2024 and at the top of the target range of 2 to 3% by the end of 2025. The unemployment rate is expected to gradually increase to 4.5%. Uncertainties prevail regarding outlook and lags of monetary policy. The statement concludes with “Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks.” This reaffirms their data-dependent stance, but it may mean that data will need to surprise even more to the upside in order for them to deliver more rate hikes.

Chinese trade surplus contracted in October and printed $56.53bn, down from $77.7bn in September. Exports have declined 6.4% y/y while imports rose 3% y/y. Declining exports are indicative of weak external demand and will have negative impact on GDP reading. Rising imports is encouraging sign for the world economy, all of exporters such as Australia, as it signals return of Chinese demand. IMF has raised forecast for China 2023 GDP to 5.4% from 5% previously and for 2024 to 4.6% from 4.2% previously. Inflation data for October saw decline in prices as CPI printed -0.2% y/y, down from being flat in September. A big drop in food prices, particularly in pork prices, caused a deflationary reading. PPI saw a decline of 2.6% y/y.

This week we will have employment data from Australia as well as production and consumption data from China.

Important news for AUD:

Wednesday:​

• Industrial Production (China)​
• Retail Sales (China)​

Thursday:​

• Employment Change​
• Unemployment Rate​

NZD

RBNZ’s survey of inflation expectations now sees inflation in one year at 3.6% while in two years it is seen at 2.76%. Inflation expectations have fallen to new lows not seen in the last couple of years. RBNZ was not planing on hiking rates in foreseeable future and this piece of data vindicates their stance.

CAD

BoC minutes from the latest October meeting saw members agree that “further tightening would likely be required to restore price stability” and that “Council members agreed to revisit need for rate hike at future decisions with benefit of more data, agreed to state clearly they were prepared to raise the rate further if needed.” These were hawkish remarks from BoC but they were not enough to help CAD gain strength.

JPY

September labor earnings came in at 1.2% y/y vs 1% y/y as expected and up from 1.1% y/y in August. However, when we take inflation into account we see that real wages fell 2.4% y/y, they have been declining since 2022. Declining real wages translated into drop in household spending which declined 2.8% y/y. One positive is that household spending rose 0.3% m/m. BoJ Governor Ueda spoke about importance of increasing productivity in order to raise real wages and added that the bank will not need to wait for positive real wages before exiting Yield Curve Control policy and negative interest rates.

This week we will have preliminary Q3 GDP reading.

Important news for JPY:

Wednesday:​

• GDP​

CHF

SNB total sight deposits for the week ending November 3 came in at CHF474.6bn vs CHF472.1bn the previous week. A small improvement but overall sight deposits have been moving in a tight range for almost two months.​

 

[katetrades]

Forex Major Currencies Outlook (Nov 20 – Nov 24)

Preliminary November PMI data from Eurozone and the UK combined with inflation data from Canada and meeting minutes from FOMC will highlight the shortened week ahead of us. Please be mindful that on Thursday it is Thanksgiving holiday in the US and there will be early market close on Friday so liquidity in the markets will be thinner.

USD

Headline CPI in October fell to 3.2% y/y from 3.7% y/y in September. It fell more than expected (3.3% y/y). Inflation was flat on the month vs 0.1% m/m as expected. Energy was the biggest contributor to decline falling 2.5% m/m with gasoline prices declining 5% m/m. Core CPI inched lower and printed 4% y/y vs 4.1% the previous month while monthly figure saw a 0.2% increase vs 0.3% as expected. Shelter rose 0.3% m/m compared to 0.6% m/m increase in September. “Supercore”, which encompasses services ex energy and housing costs and to which Fed pays special attention, rose 0.2% m/m and declined to 3.75% y/y. Probability of a December hike plunged to a zero after the report came out and bonds saw increased decline leading to lower yields.

October retail sales came in negative dropping 0.1% m/m while a drop of 0.3% m/m was expected. This is the first drop after six consecutive months of increasing sales. September number was revised up to 0.9% m/m from 0.7% m/m as previously reported. Control group, used for GDP calculation, came in at 0.2% m/m as expected while September number was revised up. Ex autos and ex autos and gas categories both came in at 0.1% m/m.

The yield on a 10y Treasury started the week and year at around 4.64%, rose to 4.67%, then fell below 4.38% post CPI report and finished the week at around 4.45%. The yield on 2y Treasury reached the high of 5.08%. Spread between 2y and 10y Treasuries started the week at -41bp then widened to -42bp as curve inverted further. The 2y10y is has now been inverted for over a year. Post CPI, PPI and retail sales FedWatchTool saw the probability of no change at both December and January meetings at 100%.

This week we will have minutes from the November meeting.

Important news for USD:

Tuesday:​

• FOMC Minutes​

EUR

ECB policymaker Martin Kazaks stated that it will be premature to say that terminal rate has been reached and thus left the possibility of additional rate hikes open. Second Q3 GDP reading saw no changes and came in at -0.1% q/q and 0.1% y/y. Final CPI reading for the month of October was unchanged with headline at 2.9% y/y and core at 4.2% y/y.

European commission has made changes to growth forecast and now sees 2023 GDP at 0.6%, down from 0.8% previously while 2024 GDP is seen at 1.2% and 2025 GDP at 1.6%. Inflation is seen declining and it is expected to print 5.6% in 2023, 3.2% in 2024 and 2.2% in 2025. So they do not see inflation falling to their target before 2026.

German ZEW survey for the month of November saw current conditions basically unchanged at -79.8 vs -79.9 in October, however huge improvements are seen in the outlook category. German outlook jumped to 9.8 from -1.1 in October while increase to 5 was expected. Euro area outlook surged to 13.8 from 2.3 the previous month, also surpassing expectations. Optimism regarding financial conditions are prevailing.

This week we will have preliminary November PMI data.

Important news for EUR:

Thursday:​

• S&P Global Manufacturing PMI (Eurozone, Germany, France)​
• S&P Global Services PMI (Eurozone, Germany, France)​
• S&P Global Composite PMI (Eurozone, Germany, France)​

GBP

Payroll change for the month of October saw addition of 33k with previous month’s reading showing huge improvement to 32k from -11k as initially reported. September ILO unemployment rate remained unchanged at 4.2% while earnings posted declines. Average weekly earnings posted 7.9% 3m/y vs 7.4% 3m/y as expected but down from 8.2% 3m/y in August. Ex bonus wages came in at 7.7% 3m/y as expected, down from 7.9% 3m/y the previous month. A drop in wages will be a very welcome sign for BoE as they can remain in pause mode. It is notable though that this report excludes some metrics therefore its validity is compromised and it is questionable how much emphasis will BoE put on in it.

Headline inflation for the month of October fell by more than expected to 4.6% y/y from 6.7% y/y in September. It was flat on the month. Core reading also posted a decline as it printed 5.7 y/y vs 6.1% y/y the previous month. Base effects and drop in energy prices were the main culprit for fall in inflation while encouraging sign can be seen in falling services inflation (6.6% vs 6.9% previously).

This week we will have preliminary November PMI data.

Important news for GBP:

Thursday:​

• S&P Global Manufacturing PMI​
• S&P Global Services PMI​
• S&P Global Composite PMI​

AUD

Q3 wage price index rose by 1.3% q/q as expected making it the biggest quarterly gain since this series is tracked (26 years). RBA has clearly incorporated this data into its last week’s decision to hike interest rates to 4.35%. October employment report saw employment change smash expectations and show 55k jobs added vs 20k as expected. The unemployment rate ticked up to 3.7% while participation rate jumped back to s in August (67%), Almost 2/3 of the jobs added were part-time (38k) with full-time printing 17k. The report shows that labor market is not weakening yet.

October activity data for China saw industrial production tick up to 4.6% y/y from 4.5% y/y in September and beat expectations of 4.4% y/y increase. Retail sales posted a big jump rising 7.6% y/y from 5.5% y/y the previous month with expectations of a 7% y/y increase. The report shows that spending on services outweigh goods spending. PBOC has left 1-year MLF rate unchanged at 2.5% but have injected CNY1450bn. This is the largest injection in almost seven years and is clearly intended to stimulate the economy.

NZD

Electronic card retail sales, consisting of almost 70% of total retail sales, fell by 0.7% m/m and 22% y/y in the month of October. Q3 PPI data showed input coming in at 1.2% q/q vs -0.2% q/q in Q2 while output came in at 0.8% q/q vs 0.2% q/q the previous quarter. This report indicates that price pressures are still going strong and even increasing on the producer side. RBNZ will be worried after this report but it will not be enough for them to start hiking rates again.

This week we will have consumption data for Q3.

Important news for NZD:

Thursday:​

• Retail Sales​

CAD

Housing starts in October printed 247.7k vs 252.9k and up from 270.7k in September. Despite higher interest rates which are slowing down housing market, there is still ample demand for housing in Canada and housing starts are printing healthy numbers.

This week we will have inflation data.

Important news for CAD:

Tuesday:​

• CPI​

JPY

Preliminary Q3 GDP reading saw economy contract by 0.5% q/q and 2.1% on annualised basis more than expected (-0.1% q/q and -0.6% annualised). GDP deflator, a measure of inflation, jumped to 5.1% from 3.5% in the previous quarter. Private consumption was flat on the quarter with Q2 reading being revised down. Expectations were for it to increase by 0.2%. Capital expenditure fell for the second consecutive quarter coming in at -0.6% vs 0.3% as expected.

CHF

SNB total sight deposits for the week ending November 10 came in at CHF476.3bn vs CHF474.6bn the previous week. Total sight deposits are still within a two-month range. SNB chairman Jordan reiterated that they will not hesitate to further tighten monetary policy in order to contain inflation if need for that arises. He then proceeded to add that he is unsure if the terminal rate has been reached.​