The week ahead of November 6-11, 2022
Watch comments from central bankers to see if they confirm last week’s thunder from each of the central banks.
Last week saw the last 3 major central bank meetings for the late October/early November period. The 3 hikes were as planned. The RBA raised its rate by 25 basis points and is expected to raise it further. The FOMC reviewed the 75 basis point weights, but noted that the terminal weights are disproportionately larger than the rate of increase in the weights. The Bank of England also raised its rate by 75 basis points, more to avoid the markets that the terminal rate will be lower than expected. Surveillance volatility continues to cause lingering results this week. Additionally, the U.S. midterm elections take place on Tuesday. A swing in the House or Senate makes it harder for Biden to push through his agenda. Also, remember that it is still earnings season and markets will see US CPI data on Thursday!
The RBA raised rates by 25 basis points last week to bring cash rates to 2.85%, as expected. Additionally, the central bank now sees inflation peaking at around 8% this year, down from 7.75% previously. The Committee also discussed the inflation outlook for 2023 at 4.75% and the inflation outlook for 2024 at 3%. The RBA has said it would prefer to raise interest rates for the period ahead, plus the tail and timing will be determined by incoming donations and the board’s assessment of inflation and labor market prospects. RBA Governor Lowe said he could reverse the larger rate hikes if necessary, but would also be careful if the situation calls for it.
You The FOMC relieved them of 75 basis points last week to bring the fed funds rate back into the 3.75% to 4.00% range, as expected. Interestingly, the Committee’s statement on this is considered to be as dovish as it said, “in determining the pace of rate increases, we take into account the cumulative reduction policy, political delays, and economic and financial developments.” . Many believed the Fed slowed the pace of rate hikes by 50 basis points at the December meeting. However, the lords of the press conference, sent him a change. There were a few phrases that shifted the sentiment from pacifist to hawkish, tell ’em that “Comers data cause ultimate rate level to be higher than expected”, “Rate increase level is more important than the pace of tightening,” and “Pausing is not something we’re thinking about or even discussing.” Will the Fed raise rates at the next meeting? Apparently so. However, markets will have to wait for more clarification from Fed speakers, even if they are reporting on the CPI due out this week.
The BOE voted a 75 basis point rate hike last week by a 7-2 majority. The sharp increase took the interest rate to 3%. The main takeaway from the meeting is that the Committee noted that the maximum interest rate is probably lower than it should be understood. Besides, I noticed the possibility of a 2 year recession ahead. The Committee sees inflation peaking at 10.9%. However, Bailey said he would leave them with a terminal tax of 5.25%, implying he will be less than that. He also added that the economy may have contracted by -0.5% in the third quarter. The first opening of UK GDP for the third quarter will be released later.
US midterm elections
Democrats and Republicans face Tuesday as each seeks to take control of the Senate and House of Representatives. All seats are up for grabs (435) in the House of Representatives, with each seat up for re-election every 2 years. Democrats currently hold a slim margin in the House with 221 seats. Republicans went for 212 seats. As a result, republics must maintain the current appellation of seats and obtain 5 additional seats to flip the House in their favor. Probes heading into the weekend allowed Republicans to postpone the House. In the Senate, there are only 35 seats to be filled. 21 of those seats are currently held by Republicans and 14 by Democrats. With the Senate currently split 50/50, Vice President Harris wanted him to vote decisively in the event of a kiss. Suddenly, the republics kiss each other only a net increase 1 seat to take control of the Chamber. If the Republicans win the House or the Senate, it will be harder for President Biden to push his agenda through Congress. The main issues facing voters center on the economy, inflation, gun control and abortion rights.
Two weeks into the second month of the quarter, we have passed the milestone of earnings season. However, don’t get too comfortable as there are still some big names to come! This week markets will hear DIS, OXY, AZN, RIVN, AMC, ADSG, NIO, RBLX, PMPEX, even as UK homebuilders are updated.
The economic calendar has been open for a few weeks, so the data we see will be important! The biggest printouts of economic data will come later in the week. On Thursday, the United States released the CPI for October. The print headline is expected to decline slightly to 8% YoY from 8.2% in September. Moreover, the base rate is expected to fall to 6.5% from 6.6% in September. Both of these children are clearly well above the Fed’s 2% inflation target. As Bailey understands, it should be -0.5% versus +0.2% in Q2. Is the UK economy in decline? Also, on Friday, the US released Michigan’s preliminary consumer sentiment reading for November. Markets will be expected to inflation characteristics of this report. Other economic data releases scheduled for this week include:
Sunday – November 6, 2022
China: trade balance (OCT)
Monday – November 7, 2022
Germany: Industrial Production (SEP)
UK: Halifax House Price Index (OCT)
Germany: PMI Construction (OCT)
Tuesday – November 8, 2022
United States: 2022 term elections
Japan: Summary of BoJ opinions
New Zealand: Business Inflation Expectations (Q4)
EU: Retail sales (SEP)
United States: IBD/TIPP Economic optimism NOV
Japan: Reuters Tankan Index (NOV)
Australia: Westpac Consumer Confidence Index (NOV)
Australia: NAB Business Confidence (OCT)
Australia: Final building permits (SEP)
China: IPC (OCT)
China: PPI (OCT)
Wednesday – November 9, 2022
Mexico: IPC (OCT)
Japan: Machine Tool Orders (OCT)
Thursday – November 10, 2022
United States: ICC (OCT)
Mexico: Interest Rate Decision
New Zealand: Business NZ PMI (OCT)
Japan: PPI (OCT)
Friday – November 11, 2022
Germany: ICC Final (OCT)
United Kingdom: GDP growth rate before (Q3)
United Kingdom: manufacturing output (SEP)
United Kingdom: industrial production (SEP)
United Kingdom: Balance of Trade (SEP)
United States: Michigan Consumer Sentiment Prel (NOV)
See » Economic Calendar
Chart of the Week » Amazon (AMZN) weekly
On the weekly chart, AMZN stock price closes at its March 2020 pandemic lows. 2 weeks ago, the stock was trading at 121.32! Over the past two weeks, however, the stock has been battered by traders after guiding its traders lower. The share price is at a low of 27%. If the stock continues to decline, the first support is most based on the week of March 16, 2020 at 81:30. Below, the price may reach the lows of the week of December 24, 2018 at 65.35, after the Fibonacci extension of 127.2% from the lows of March 2020 to the all-time highs, at 52.10. However, if Amazon stock price manages to reverse, there is already a confluence of horizontal resistance and last week’s nights between 101.26 and 104.87. Above it, the price can reach previous highs at 121.32 and then 146.57.
Traders are watching this week for any kind of broadcast of central bank meetings in the past week. Watch for comments from central bankers to see if they confirm last week’s thunder from each of the central banks. Additionally, one may want to watch the US election results for any surprises. The Republican is expected to win at least the House. If the Democrats fail (unlikely given the latest polls), stocks could trade lower. The star of the week will be Thursday’s US CPI. A conference higher that could send the Fed up 75 basis points in December!
By Joe Perry, CMT, FOREX.com » Official Site
Disclaimer: The information and opinions contained in the report are provided for general information only and do not constitute an offer or a solicitation concerning the sale or sale of foreign exchange contracts or CFDs. Although the information contained herein is from sources believed to be reliable, the author does not warrant its accuracy and is not exhaustive, and assumes no liability for direct, indirect or consequential damages arising from than anyone he trusts such information.