- Markets are awaiting today’s release of US inflation (CPI) data, which is expected to show a fall in the annualized rate from 3.7% to 3.6%, and a fall in the monthly increase from 0.6% to 0.3%. The US Dollar has been weak, even after yesterday’s FOMC meeting minutes which suggest the Fed will make a further hike in 2023, so an even lower print could send the Dollar tumbling. Conversely, a shock increase could bring the Dollar back.
- The war in the Middle East remains essentially contained to Gaza and Israel, although there have been minor clashes between Israel and Hezbollah on the Lebanese border. Crude Oil has given up all its gains made earlier this week, and with the falling Dollar, markets seem to expect that the situation will remain contained. The US offered another aircraft carrier yesterday to deter Iran or Hezbollah from entering the war.
- Precious metals stand out as continuing to strengthen, with Gold rising especially firmly, although it technically remains within a long-term downwards trend.
- In the Forex market, the US Dollar Index has now broken below the key support level at 105.36, which is technically suggestive of a further fall. However, trend traders in the Forex market will be most interested in being long USD/JPY which continues to strengthen. Since the Tokyo open last night, the New Zealand Dollar has been the weakest major currency, while the Swiss Franc has been the strongest.
- Yesterday saw the release of FOMC meeting minutes which suggested that the Fed will make one more 25bps rate hike during the remainder of 2023. This did not have an effect of strengthening the Dollar.
- Yesterday saw the release of higher-than-expected PPI data in the US, suggesting that inflation may not be falling today as expected.
- Bank of Japan board member Noguchi speaking a few hours ago stated that the raising of the YCC allowance earlier this year was not intended to be a tightening of monetary policy. This may help the Yen to weaken further, although the prospect of Bank of Japan intervention remains especially if the USD/JPY currency pair reaches the big round number at ¥150.