Yesterday, the University of Michigan revised 1Y inflation expectations for October to 4.9% from its preliminary 5.1% reading. Initial jobless claims for the week ending 5 November increased more than expected to 225k vs the consensus for a rise to 220k from 218k (revised from 217k). Due to the long Thanksgiving weekend starting today, there will be no US data or Fed speeches. With US equities higher and the USD weaker in overnight markets, markets will probably attempt to take currencies higher again. For example, GBP closed above 1.20 yesterday after bouncing off its 38.2% Fibonacci level (1.1840) on Tuesday. It could target the 50% Fibo level near 1.22, provided it does not consolidate around 1.2050 in the coming sessions. That said, we are mindful that the UST 10Y yield is below the FFR. We expect Fed Chair Jerome Powell to be hawkish when he discusses the economic outlook and the labor market on 30 November.
NZD closed above 0.62 for the first time since 25 August and is close to retracing half of its April-October fall. Yesterday, the Reserve Bank of New Zealand delivered the 75 bps hike expected by consensus. With the official cash rate at 4.25% and above the 4.1% terminal rate projected in August, the RBNZ now sees more hikes to 5.5% in 2023. Unlike the US, inflation has yet to show signs of peaking in New Zealand. RBNZ reckoned CPI inflation could rise further to 7.5% over the next couple of quarters from 7.2% in September. RBNZ also played down the 11.5% fall in house prices from its November 2021 peak, citing the 15% rise in household wealth since end-2020. However, the central bank did not mind a recession to return inflation to its 1-3% target. Hence, the NZD may find resistance at its 50% Fibonacci retracement level of around 0.6270.
Quote of the day
“I love fools’ experiments. I’m always making them.”
Charles Darwin
24 November in history
Charles Darwin published “On the Origin of Species” in 1859.
Topic
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