Navigating Central Banks and a U.S. Data Dump | Morning Express | 1/18/2023
Posted: Jan. 18, 2023, 9:46 a.m.
Fundamentals: U.S. equity benchmarks have worked higher from session lows in the aftermath of foreign central bank news. The focus will quickly shift to a deluge of domestic economic data, including a pivotal read on the Producer Price Index.
First, in a highly anticipated announcement last night, the Bank of Japan left policy unchanged, reaffirming its commitment to yield curve control and the willingness to add measures “without hesitation if needed”. Speculation had mounted that BoJ Governor Kuroda would begin tweaking the ultra-easy measures before his April exit and the Japanese Yen rallied 3.12% last week. Instead, he highlighted the expectation core consumer inflation slows to 2% in the latter half of the year and an increasingly uncertainty economic environment. The Yen fell as much as 2%.
Yesterday, the Euro slumped after anonymous sources close to the ECB said the bank is likely to slow its pace of hikes after a 50bps move in February. However, in an interview at the World Economic Forum in Davos, the Bank of France Governor Villeroy, a Governing Council member of the ECB, noted it is too early to speculate about Mach and reiterated comments from ECB President Lagarde, to expect hikes of 50bps for some time. His comments lifted the Euro to local highs, in the same regard encouraging a rebound in the Yen, and given U.S. Dollar weakness, a better environment for risk-assets at the onset of U.S. hours.
Do not miss our daily Midday Market Minute, from yesterday.
Producer prices are a leading indicator to consumer prices. Although Core PPI y/y had fallen one-third from its March peak of 9.6% when Russia invaded Ukraine, November’s read did not slow as much as expected. However, today’s December read showed a significant reduction in Producer Prices, with m/m headline disinflating by -0.5%, versus -0.1% expected, and y/y slowing to 6.2% versus 6.8% expected, the slowest since April 2021.
Retail Sales for December missed expectations on all fronts, highlighted by Core (ex-autos) m/m -1.1% versus -0.4% and headline -1.1% versus -0.8%. Industrial and Manufacturing Production is due 8:15 am CT.
We now look to Fed speak, beginning with Atlanta Fed President Bostic at 8:00 am CT, St. Louis Fed President Bullard at 8:30 am CT, and Philadelphia Fed President Harker at 1:00 pm CT.
E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 4009.50, down 8.75
NQ, yesterday’s close: Settled at 11,624.50, up 16.50
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NQ (March)
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Crude Oil (February)
Fundamentals: The IEA Monthly Report anchored the potential for record Oil demand on China’s reopening, saying it could rise by 1.9 mbpd to reach 101.7 mbpd. The report also said such demand growth tightens “the balances (supply/demand) as Russian supply slows under the full impact of sanctions.” Coupled with a weaker U.S. Dollar, the IEA’s report has helped Crude retest the $82 mark for the first time since December 5th. The U.S. Dollar Index traded to a new local low on the heels of the BoJ, comments from ECB officials, a soft slate of U.S. data (highlighted in the S&P/NQ section).
The focus will shift to U.S. inventory data with the official EIA report due tomorrow, delayed a day due to the U.S. holiday. Expectations are for -1.75 mb Crude, +2.325 mb Gasoline, and +0.525 mb Distillates.
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Gold (February) / Silver (March)
Gold, yesterday’s close: Settled at 1922.7, up 12.8
Silver, yesterday’s close: Settled at 24.068, down 0.304
Fundamentals: Gold and Silver have been underpinned by a resurgence in the Euro overnight, on the heels of Bank of France Governor Villeroy’s comments, an ECB Governing Council Official. We discussed this in detail in the S&P/NQ section. Overnight weakness in the Japanese Yen has also been pared, with a soft slate of U.S. economic data being the final catalyst, all of which are discussed in the S&P/NQ section. Disinflation within the PPI report, coupled with awful Retail Sales data, has helped ignite a rally across the Treasury complex, bringing further tailwinds to Gold and Silver’s strength on the session.
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Silver (March)
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Crude Oil (February)
Yesterday’s close: Settled at 80.45, up 0.34
Fundamentals: The IEA Monthly Report anchored the potential for record Oil demand on China’s reopening, saying it could rise by 1.9 mbpd to reach 101.7 mbpd. The report also said such demand growth tightens “the balances (supply/demand) as Russian supply slows under the full impact of sanctions.” Coupled with a weaker U.S. Dollar, the IEA’s report has helped Crude retest the $82 mark for the first time since December 5th. The U.S. Dollar Index traded to a new local low on the heels of the BoJ, comments from ECB officials, a soft slate of U.S. data (highlighted in the S&P/NQ section).
The focus will shift to U.S. inventory data with the official EIA report due tomorrow, delayed a day due to the U.S. holiday. Expectations are for -1.75 mb Crude, +2.325 mb Gasoline, and +0.525 mb Distillates.
Technicals Premium
🔒 You need to be a Premium User to unlock this content. Click here to unlock.
Levels Premium
🔒 You need to be a Premium User to unlock this content. Click here to unlock.
Gold (February) / Silver (March)
Gold, yesterday’s close: Settled at 1922.7, up 12.8
Silver, yesterday’s close: Settled at 24.068, down 0.304
Fundamentals: Gold and Silver have been underpinned by a resurgence in the Euro overnight, on the heels of Bank of France Governor Villeroy’s comments, an ECB Governing Council Official. We discussed this in detail in the S&P/NQ section. Overnight weakness in the Japanese Yen has also been pared, with a soft slate of U.S. economic data being the final catalyst, all of which are discussed in the S&P/NQ section. Disinflation within the PPI report, coupled with awful Retail Sales data, has helped ignite a rally across the Treasury complex, bringing further tailwinds to Gold and Silver’s strength on the session.
Technicals Premium
🔒 You need to be a Premium User to unlock this content. Click here to unlock.
Levels Premium
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Silver (March)
Resistance: 24.53-24.78***, 25.35**, 26.15***
Pivot: 24.30
Support: 23.98-24.09**, 23.62-23.74***, 23.20-23.32**, 22.73-22.88***
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