{"id":16625,"date":"2021-10-13T12:32:00","date_gmt":"2021-10-13T11:32:00","guid":{"rendered":"https:\/\/youtrading.com\/en\/?p=16625"},"modified":"2021-10-14T09:45:39","modified_gmt":"2021-10-14T08:45:39","slug":"markets-in-wait-and-see-mode-as-us-cpi-fomc-minutes-loom","status":"publish","type":"post","link":"https:\/\/youtrading.com\/en\/markets-in-wait-and-see-mode-as-us-cpi-fomc-minutes-loom\/","title":{"rendered":"Markets in wait-and-see mode as US CPI, FOMC minutes loom"},"content":{"rendered":"\t\t
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Market sentiment this morning is cautiously positive ahead of key economic events in the US, including the release of the September CPI report at 1330BST and the release of the FOMC minutes of the more hawkish than expected 22nd September meeting at 1900BST. Today is also the unofficial start to the next US earnings season, with a number of the big US banks reporting before the end of the week \u2013 corporate guidance on earnings projections and how these are being affected by inflationary pressures and supply-side disruptions will be a key theme to watch in the coming weeks. Speaking of there were reports that Apple<\/a> is set to slash iPhone 13 production by 10M units in 2021 amid the ongoing global shortage of chips. The latest news from Apple highlights the ongoing supply issues faced by global companies and US President Biden will be delivering a speech on supply chains later in the afternoon; he might use the speech as an opportunity to unveil policies aimed at easing supply pressures and investors will be keeping a close eye.<\/p>

Ahead of these key events and despite the negative update from Apple, stocks in Europe and the US are mostly higher with the Stoxx 600 up about 0.4% on the day just under 460 and E-mini S&P 500<\/a> futures trading higher by around 0.2% close to the 4350 level. A more sustained rebound ahead of key the aforementioned events out of the US this afternoon seems unlikely, however, and sentiment in global equity markets continues to feel quite depressed; strategists continue to cite concerns about more persistent inflation and, subsequently, central banks embarking on more aggressive hiking cycles at a time when medium-term growth estimates are being revised lower as a negative for equities. Recall that the quarterly IMF World Economic Outlook was released yesterday, and the US got a big downwards revision for its 2021 growth forecast to 6.0% from 7.0%, which, despite an upgrade to the EU\u2019s 2021 growth forecast, dragged the IMF\u2019s global growth projection slightly lower. But analysts and economists reading the IMF\u2019s view on things would have found the overarching message encouraging; whilst the pace of the global recovery in 2021 is slowing a little, 2022 is still expected to be a strong year (the US and global 2022 GDP forecasts were left unchanged), far from the stagflationary picture that some have been painting as of late. The IMF also reiterated its view that global inflationary pressures are set to be transitory, with most developed markets seeing YoY rates of CPI fall back towards 2.0% by mid-2022, aside from a few countries where this drop back may take a little longer (like the USA).<\/p>

Nonetheless, fears about high inflation prompting a hawkish response from major central banks, thus damaging long-term growth prospects, have been a big driver of price action in the US yield curve over the last few days; short-end yields have been rising sharply (to reflect expectations that the Fed will be raising interest rates at a faster pace in the coming years) and falling long-end yields (perhaps reflecting a more pessimistic view about the US economy\u2019s long-term growth outlook). For reference, 2-year yields are at post-pandemic highs above 0.35% and 5-year yields yesterday hit post-pandemic highs at 1.10%. 10-year yields<\/a> nearly crept as high as the 1.65% level yesterday (highest since May) but have since reversed quite sharply back under the 1.60% mark and are currently trading around 1.57%. FOMC Vice Chair Clarida all but confirmed that the Fed will announce its QE taper plans at the November meeting (in three weeks), saying the economic conditions that the FOMC wanted to see before tapering had been more than met in terms of inflation and are \u201call but met\u201d with regards to the labour market. Clarida reiterated his stance that the spike in inflation in the US is set to be transitory but that there are upside risks to his forecast. Comments from Cleveland Fed President Bostic on inflation were much more hawkish, with him warning that \u201cit is becoming increasingly clear that the feature of this episode that has animated price pressures, mainly the intense and widespread supply-chain disruptions, will not be brief\u201d. Elsewhere, Bullard endorsed a November taper announcement and said the taper should conclude by the end of Q1 so that the Fed can be ready to respond to inflation (i.e. with rate hikes) if needed. The net hawkish tone of FOMC members yesterday reinforces the trend of short-end US yields moving higher \u2013 for cues as to what longer-term yields might be headed next, it might be worth looking at the energy complex. Nat gas<\/a> prices in the US continue to slowly pull back from last week\u2019s stunning all-time highs and oil has come off the boil, which in the immediate term is easing some inflation concerns. This might also be weighing on longer-term US yields.<\/p>

Taking a look at FX markets this morning; the US dollar is notably weaker, with the DXY<\/a> slipping back from yesterday\u2019s multi-month highs above 94.50 to the 94.30 regions, though the index is not really showing any signs of a meaningful push lower or test of 94.00. Not ahead of key US CPI data and the FOMC minutes, anyway. This morning\u2019s downside might reflect the recent pull-back in long-term US yields (long-term yields in the Eurozone have held up better), which has likely negated any bullish impulses coming from the recent move higher in short-end yields. Or it could simply be some profit-taking on dollar long positions ahead of key events, with the USD having performed generally very well in recent weeks. The yen is the only G10 currency not really above to benefit from the slightly weaker USD this morning, with USDJPY<\/a> yet to see any meaningful technical correction of profit-taking since its surge higher the mid-111.00s to current levels above 113.50 over the last five sessions (a more than 2.0% rally). Short and long-end US yields might need to fall in unison for USDJPY to fall back and test the key support area just to the north of 112.00. Elsewhere, UK GDP data for August was not as good as expected and its looks as though the country\u2019s Q3 growth rate is going to come in well below the BoE\u2019s forecast, before seeing further slowing in Q4 as a result of the constantly talked about supply-side problems plaguing the global economy (production disruptions and labour shortages slowing supply chains and high energy costs etc.). But with the labour market looking solid and inflation concerns elevated, the data hasn\u2019t impacted UK money market pricing for a 15bps rate hike to 0.25% by the year\u2019s end, which may be supporting sterling this morning (GBPUSD<\/a> is up 0.3%). Amid all the speculation about the BoE tightening policy soon, there will be a lot of focus on a speech from BoE MPC member Cunliffe at 1530BST today. Finally, NZD<\/a>, CHF<\/a>, EUR<\/a> and CAD<\/a> are all also benefitting from the weaker dollar, with the Euro shrugging off data showing a 1.6% MoM contraction in the level of industrial production in August, and the Aussie flat ahead of a speech from RBA Deputy Governor Debelle this evening and the release of September jobs data that is likely to show another big drop in employment due to lockdowns.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

Market sentiment this morning is cautiously positive ahead of key economic events in the US, including the release of the September CPI report at 1330BST and the release of the FOMC minutes of the more hawkish than expected 22nd September meeting at 1900BST. Today is also the unofficial start to the next US earnings season, […]<\/p>\n","protected":false},"author":3,"featured_media":16626,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[9],"tags":[69,101,279,307],"yoast_head":"\nMarkets in wait-and-see mode as US CPI, FOMC minutes loom - Youtrading UK<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/youtrading.com\/en\/markets-in-wait-and-see-mode-as-us-cpi-fomc-minutes-loom\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Markets in wait-and-see mode as US CPI, FOMC minutes loom\" \/>\n<meta property=\"og:description\" content=\"Market sentiment this morning is cautiously positive ahead of key economic events in the US, including the release of the September CPI report at 1330BST and the release of the FOMC minutes of the more hawkish than expected 22nd September meeting at 1900BST. 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