The JPY is the strongest and the AUD is the weakest as the NA session begins

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The strongest to the weakest of the major currencies

The JPY is the strongest and the AUD is the weakest as the NA session begins. The USD is also higher after falling last week on the back of falling rates. The DXY fell -0.40% last week although it closed off lows

On Friday, Chair Powell wrapped up the Fedspeak before the blackout period ahead of the Fed rate decision on December 13. The summary of the Federal Reserve’s stance can be organized into several key points:

  1. Current Monetary Policy and Inflation Outlook: The Federal Reserve acknowledges that its current monetary policy is in a restrictive phase but is cautious in declaring it sufficiently so. The Fed has made progress in lowering inflation and welcomes the recent softening in inflation data. However, they emphasize the need to see more progress towards reducing inflation to their 2% target. Powell indicates that they are prepared to raise rates further if needed to control inflation.

  2. Economic Uncertainty and Labor Market: The Fed notes that economic uncertainty remains unusually high due to the ongoing effects of the pandemic on demand and supply. Despite this, there has been positive movement in the labor market, with wage growth high but moderating and unemployment rates slightly up but still historically low. The return of people to the labor market post-pandemic and increased immigration in 2023 are positive signs, though the full impact of these changes is still to be understood.

  3. Future Policy Direction and AI’s Impact: Powell suggests that the Federal Reserve is moving cautiously with its policy decisions, considering the unpredictable nature of current economic conditions. He mentions that it will take time to understand the full impact of Artificial Intelligence on the economy, including its potential effects on job creation and displacement.

  4. Personal Remarks from Powell: On a lighter note, Powell, when asked about his holiday plans, humorously equates a “big party” to receiving a favorable inflation report, highlighting his focus on economic indicators.

In summary, the Federal Reserve, under Powell’s leadership, is carefully navigating a complex economic landscape, with a particular focus on managing inflation while being mindful of the broader economic uncertainties and the evolving labor market. The Fed remains open to further tightening of monetary policy if necessary, underscoring its commitment to achieving stable inflation levels.

US stocks in pre-market trading are lower to start the week. Last week, the major indices moved higher for the 5th consecutive week. Yields moved lower with the 10-year yield tumbling 27 basis points. The 2-year yields fell even more by 40 basis points. That steepened the 2-10 year spread by 13 basis points although it still stands at -35.5 basis points. The futures are now implying a 59% chance that rates will be cut in March with the total easings in 2024 rising to 128 basis points. About 40 bps of cuts have been added to expectations in the past few days.

The lower dollar/lower rates spiked the price of gold to an all-time high of $2146 today, but prices have retraced the gains back to $2068 currently and is lower than the close on Friday. Oil is also lower as markets continue to digest the global economy and the OPEC “cuts” announced last week. Crude oil spiked above its 200-day MA last week to a high near $79.60, but could not close above that key MA level on Thursday and traded to a low of $72.89 today- just above the low from November at $72.22 (lowest level since July 7).

Bitcoin is also on fire with the digital currency moving above $40,000 and continuing the spike to $42,162. The current price is trading around $41,800 after closing on Friday at $38,707. Analysts say that the digital currency is moving higher on the back of expectations for lower rates spurring on speculative buying. The high price today reached up to test the 50% midpoint of the move down from the all-time high of $69000. That midpoint comes in at $42240 (see chart below).

Bitcoin surged to the 50% midpoint area

This week the economic data will work to a crescendo with the US NFP scheduled to be released on Friday. Expectations are that 180,000 jobs were created in November, after October’s 150K advance. The unemployment rate is expected to remain at 3.9 percent with Avg. hourly earnings rising 0.3% on the month, an annual rise of 4.0%. On Tuesday, the ISM Services PMI and the US JOLTS report will be released. On Wednesday, we will get the US ADP data. On Thursday, the weekly US Jobless Claims figures will be released. Remember the continuing claims spiked higher last week. The reserve Bank of Australia will announce its interest rate decision on Tuesday (10:30 PM ET today). No change is expected. The RBNZ announced last week and the thought was that they were a little bit more hawkish due to inflation concerns. The Bank of Canada will announce its rate decision on Wednesday at 10 AM ET with no change expected (for the 3rd consecutive meeting). The Canadian employment data on Friday showed a higher-than-expected employment change of 24.9K versus 14.2 K estimate but the unemployment rate came in higher at 5.8% versus 5.7% the prior month. China will announce CPI data at the end of the week.

A snapshot of the markets to kickstart the North American session shows:

  • Crude oil is trading trading down -$0.78 at $73.49.
  • Spot gold is trading down -$3.22 or -0.16% at $2068.74
  • Spot silver is trading down $0.30 or -1.21% at $25.16
  • Bitcoin is trading at $41,859. On Friday the digital currency closed at $38,707

In the US stock market, the major indices are implying a lower opening after closing higher for the 5th consecutive week last week.

  • Dow Industrial Average is trading down -70 points. On Friday, the Dow Industrial Average rose at 294.61 points or 0.82%. For the week, the index rose 2.42%.
  • S&P index is trading down -17 points. On Friday the index rose 26.83 points or 0.59%. For the week the index rose 0.77%
  • NASDAQ index is down -75 points. On Friday the index rose 78.81 points or 0.55%. For the week the index rose 0.38%

In the European equity markets, the major indices are trading mixed.

  • German DAX, is trading up 14.83 points or 0.09%. Last week the index rose 2.3%.
  • France’s CAC, is trading down 21.73 points or -0.30%. Last week the index rose 0.73%
  • UK’s FTSE 100, is trading down or -0.48%. Last week, the index rose 0.55%
  • Spain’s Ibex, up 18.21 points or 0.18%. Last week the index rose 2.03%
  • Italy’s FTSE MIB, -0.18% (10 minute delay)

In the US debt market, yields are trading higher with the up the most as the yield curve gets more negative a bit. Last week the yield curve steepened:

  • US 2Y T-NOTE: 4.508%, up 4.5 basis points
  • US 5Y T-NOTE: 4.190% of 3.7 basis points
  • US 10Y T-NOTE: 4.249% +2.7 basis points
  • US 30Y BOND: 4.420% +0.4 basis points
  • 2 – 10-year spread is trading at -35.9 basis points
  • 2 – 30 year spread is trading at -18.9 basis points

In the European debt market, benchmark 10-year yields are trading mixed:

European 10 year yields

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