Morning Call Script - 12 Oct 2023
Overnight asset drivers & the impending data calendar
Of course, the FOMC minutes saw rates "higher for longer"but they did acknowledge there were now two-sided risks to achieving the Fed's goals (over and under tightening) ... Bloomberg, WSJ, BMO, Calculated Risk
This did little to knock G10 from its 50pip or so range. Most G10 pairs have been trading in a holding pattern over the past 24/48 hours waiting for CPI as EUR consolidates around 1.06, USDJPY 149.00 and GBPUSD 1.2300. There was a slight softer USD bias again overnight with EURUSD to the top of its recent range 1.0630, GBPUSD 1.2320 and AUD 0.6420 but the moves have been relatively muted.
Equity futures in APAC (Nikkei and Hang Seng +1%) followed the positive finish on Wall Street which took the hotter PPI print in its stride. Similarly, US10s maintained its descent and is now sub 4.6%.
No more waiting for the bond market... CPI day has finally arrived, is it still heading in the Fed's direction?
0.2-0.3% = the goldilocks scenario? Showing core still trending in Fed's favour, limits the risk of them needing to do more.
sub 0.2% and rate cuts could be pulled forward in the curve,
north of 0.4/0.5% could potentially see the market try and reprice Nov meeting probabilities back to ~50%
Elsewhere in the US, UAW have widened their strike to one of Ford's key plants (Bloomberg) and Steve Scalise has been nominated by Reps to be the next House Speaker (NBCNews). However, fractions remain and the WSJ report it wont be easy for him to now win the speakership..."Scalise will need support from a majority of the House, or 217 members, if all current lawmakers cast votes for a candidate. The House is split 221-212, giving Republicans little room to manoeuvre because all Democrats are expected to oppose him"
Have a great day, and keep smiling!
Goldman Sachs - Implications of a higher-for-longer rate regime
GBP (07:00): UK GDP Estimate
USD (13:30): US Core and Headline CPI
USD (13:30): Initial Claims
USD (18:00): 30y auction
ECB: Elderson (08:40) & Panetta (12:00) to speak and ECB minutes are released (12:30)
Fed's Bostic (18:00)
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