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CRUDE OIL WILL FALL MUCH MORE DEEPER SHORT

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A weaker dollar Friday was supportive of energy prices. Crude prices also moved higher after Friday's stronger-than-expected U.S. Apr payroll report eased concerns that the U.S. economy is headed for recession. REALLY!?

WELL ,the economic data reflecting the past, but not current events, and the price is always right.

The big boys gonna short, so I do.

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Week Ahead - May 8th

The upcoming week in the US will be dominated by news related to prices, including the inflation rate, producer prices, and export and import prices, as well as the Michigan consumer confidence CPI gauge. Additionally, CPI figures are scheduled to be released in China, Mexico, Brazil, India, and Russia. In the UK, the Q1 GDP growth data will be released, and investors will be closely monitoring the Bank of England's interest rate decision. Elsewhere, China is set to publish external trade data, and Australia will report on consumer and business confidence.

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Oil Soars As U.S. Job Market Stays Strong

traders bet on a rebound after the recent sell-off
WTI oil moved above $71.00 as traders reacted to the Non Farm Payrolls report.
Brent oil settled above $75.00
WTI oil rallied as recession fears eased after the release of Non Farm Payrolls report. Traders used the recent sell-off as an opportunity to build long positions in WTI oil.

If WTI oil climbs above the $71.70 level, it will head towards the resistance at $72.70. A move above $72.70 will push WTI oil towards the $74.00 level.

R1:$71.70 – R2:$72.70 – R3:$74.00

S1:$70.30 – S2:$69.20 – S3:$68.00
Brent oil has also managed to gain strong upside momentum in today’s trading session as risk appetite increased.

If Brent oil moves above the $75.50 level, it will head towards the resistance at $76.25. A move above this level will push Brent oil towards the $77.50 level.

R1:$75.50 – R2:$76.25 – R3:$77.50

S1:$74.60 – S2:$73.00 – S3:$71.70
Crude oil markets have fallen a bit significantly during the trading week, only to turn around and find plenty of buyers willing to step in and trying to pick the market back up. By doing so, the market continues to see extreme volatility.
WTI Crude Oil Weekly Technical Analysis
The West Texas Intermediate Crude Oil market fell rather hard during the trading week, as we continue to see a lot of negativity around the idea of global demand. However, the $65 level offered enough support to turn things back around, and it now looks as if we may be trying to find the bottom of a summer range.

This does make a certain amount of sense, as the market tends to find some type of area that it wants to trade in during the “summer driving season” in the United States. If we were to break down below the bottom of the candlestick though, that would lead to even further losses, and would show that the economy is coming undone completely. On the upside, the 50-Week EMA sits right around $81.65, and that’s somewhere near the top of this overall consolidation area.

Brent Crude Oil Weekly Technical Analysis
The Brent market also fell rather hard, breaking below the $70 level at one point during the week. However, we have turned around quite drastically to support that area, and now it looks like Brent is finding its own range as well. The 50-Week EMA sits near the $86.50 level, and is offering a significant amount of resistance. On the other hand, if we were to break down below the tale of the candlestick for this week, that would be a very negative turn of events and could send this market down to the $60 level.

Again, both grades of oil are going to be paying close attention to the global economy, and the turnaround that we had seen late in the week was a little bit suspicious, as if somebody was stepping in and trying to support the market.

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Week Ahead: US CPI Report May Rock These 3 Markets
Even as anticipation mounts ahead of the US jobs data due later today, investors may be bracing for more volatility in the week ahead thanks to another round of risk events.

Economic Calendar for Next Week
All eyes will be on the incoming US inflation data as well as speeches from financial heavyweights and other risk events which could spark some fresh action across markets.

Monday, May 8

UK bank holiday honouring Charles III coronation
EUR: Germany industrial production, ECB Chief Economist Philip Lane speech
Tuesday, May 9

CHN: China trade, money supply
AUD: Australia consumer confidence
EUR: ECB Chief Economic Philip Lane speech (IMF)
USD: Fed New York President John Williams speech
US President Joe Biden debt ceiling talks
Wednesday, May 10

EUR: Germany April CPI (final)
USD: US April CPI
Thursday, May 11

CNH: China PPI, CPI
GBP: UK BOE rate decision & press conference
USD: US PPI, initial jobless claims
G7 finance ministers meet in Japan
Friday, May 12

GBP: UK Industrial production, Bank of England Chief Economist Huw Pill speech
USD: University of Michigan consumer sentiment, Fed speeches
The April US consumer price index (CPI) report published on Wednesday 10th May will be exactly one week after the Federal Reserve raised rates and signalled a pause in further increases.

Given how Fed Chair Jerome Powell has left the door open to further tightening if incoming economic data warrants, this could add more spice to the report.

CPI Forecasts
Markets are forecasting:

CPI year-on-year (April 2023 vs. April 2022) to remain steady at 5.0%.
Core CPI year-on-year to cool 5.4% from the 5.6% in the prior month.
CPI month-on-month (April 2023 vs March 2023) to rise 0.4% from 0.1% in the prior month.
Core CPI month-on-month to cool 0.3% from the 0.4% in the prior month.
Ultimately, further evidence of inflation slowing down could reinforce expectations around the Federal Reserve pausing and eventually cutting interest rates. Should inflation remain sticky, this could rekindle bets around the Fed leaving interest rates higher for longer.

Expectations are rising over the Federal Reserve cutting interest rates with the chance of a 25-basis point cut in July currently priced at 53%, according to Fed funds futures! It will be interesting to see how the incoming inflation data shapes market expectations around the central bank’s next move.

How Might the Markets React to the CPI Report?
With all of the above discussed, here’s how these 3 assets could react to the US CPI report

USD Index
The past few months have been rough and rocky for the dollar as investors weighed the prospects of the Federal Reserve pausing and then eventually cutting interest rates. More pain could be in store for the dollar if US inflation cools more than expected in April.

A soft inflation print may drag the USD Index toward the 100.72 level. Should prices experience a bearish breakout, this could open the doors toward 100.
A sticky inflation print could throw a lifeline to dollar bulls, propelling back above 101.50 with 102.34 acting as a key level of interest.
SPX500_m
After being trapped within a range for the past few weeks, could a breakout be on the horizon for the SPX500_m?

If the inflation numbers beat expectations, this may trigger a bearish breakout on the SPX500_m – taking prices below the 4050-support level.
Should the inflation numbers come in lower than market forecasts, SPX500_m bulls could be injected with renewed confidence as expectations intensify over the Fed ending its rate cycle. This could send the index back toward the 4180 resistance level and beyond.
Gold
It may be wise to fasten your seatbelts for potential volatility on gold due to its high sensitivity to inflation data and US interest rate expectations. The precious metal remains bullish on the daily charts despite prices pulling back from near-record highs.

A soft inflation report could sweeten appetite for the zero-yielding asset as bets rise over the Fed cutting rates in 2023. This development could push the metal back towards the 2023 high of $2063 with bulls eyeing $2070 and the all-time high at $2075.
A stronger-than-expected inflation number could drag gold prices back toward the psychological $2000 level.

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Traders Take Profits After Report Reveals Strong US Job Growth
Technically speaking gold traded through a series of lower highs and strong support at $1980.
Market participants used the jobs report to actively engage in U.S. equities taking all three major indices higher. The Dow Jones industrial average gained 1.65%. The Standard & Poor’s 500 gained 1.85%, and the NASDAQ composite gained 2.25% in active trading today.
Gold Prices Drop as Investors Take Profit Despite Strong Fundamentals
Gold investors and traders also used this report as a reason to pull profits from recent gains in gold which had roughly a $100 trading range from Tuesday’s open at $1990 to yesterday’s high of $2083. Before the upside breakout in gold which occurred on Tuesday, May 2 gold pricing was contained in a narrow trading range between $1980 and $2020.
Technically speaking gold traded through a series of lower highs and strong support at $1980. This created an asymmetrical triangle pattern composed of a descending top and a flat bottom. Typically, this type of asymmetrical triangle occurs during a price correction and once pricing reaches the apex of the triangle market technicians look for a break to lower pricing. In rare instances, this pattern can be found during an uptrend as witnessed this week in gold.

Considering that the major fundamental factors that have moved gold substantially higher are still unresolved and worrisome today’s strong decline in gold prices could present an opportunity to buy the dip. There is still common ground that both Democrats and Republicans can sign off on as we get closer and closer to the date at which the government can no longer meet its obligations. Whether or not there are more midsize regional banks that could become insolvent is unknown. Combined these issues could certainly continue to be highly supportive of gold prices moving them higher.

However, gold enthusiasts got a reprieve today as gold futures dropped $30.80 or 1.5% with the most active June 2023 Comex contract currently fixed at $2024.90.

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The US Week Ahead
The US CPI Report will impact the EUR/USD on Wednesday. Following the US Jobs Report, a hotter-than-expected US CPI Report would refuel bets on a June Fed interest rate hike.

On Thursday, wholesale inflation and jobless claims figures will also draw interest before consumer sentiment numbers on Friday.

Investors should track FOMC member reactions to the US Jobs Report and the incoming US CPI Report.

According to the CME FedWatch Tool, the probability of a 25-basis point June interest rate hike rose from 0.0% to 8.5%. On Friday, the US Jobs Report drove the modest rise. However, the US Jobs Report wiped out bets on a June Fed interest rate cut.

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Crude oil markets have fallen a bit significantly during the trading week, only to turn around and find plenty of buyers willing to step in and trying to pick the market back up. By doing so, the market continues to see extreme volatility.

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Again, both grades of oil are going to be paying close attention to the global economy, and the turnaround that we had seen late in the week was a little bit suspicious, as if somebody was stepping in and trying to support the market.

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An Expected Rates Hike
Powell’s 0.25% hike was expected, so when it became a reality, markets didn’t really react. But what changed was the narrative regarding the future price moves. Powell said that they will make further decisions based on the data that they get. So, Powell is no longer saying about further increases but about being data-dependent. The latter is irrelevant because the Fed is always data-dependent, at least in theory (theory says that there are no political influences on the Fed, too…). The former, however, means that the pause is on the table.

That’s what was said.

What does it mean? It means that if the inflation isn’t lower, they will have to raise rates again. Why? Because inflation is political – simple as that. That’s the thing that voters are most concerned with, and that’s a fact.

If the inflation does move lower, they will probably not be raising rates again.

Also, Powell added that he doesn’t plan to cut rates anytime soon.

“Inflation [is] going to come down not so quickly,” he said, yesterday. “It will take some time. And in that world, if that forecast is broadly right, it would not be appropriate to cut rates.”

So, to summarize what’s likely to happen: the rates are either moving higher if the inflation doesn’t decline or the rates are staying where they are if inflation declines visibly.

In both cases, real interest rates (nominal rates minus expected inflation) are going to increase. So, both outcomes presented by Powell are bearish for gold and the rest of the precious metals sector.

People expect that it’s practically certain that the rates will stay as they are on the next Fed meeting and that they will then start to decline. In other words, the market participants think that the rates are going to decline within the next couple of months, but not necessarily in June.

Please note the contrast between the current expectations and what I wrote above as the scenarios that Powell pretty much revealed.

For a long time, we’ve been emphasizing that inflation is much stickier than many expect, so it’s much more likely that what Powell is saying about the rates and the outlook for them is much more realistic than what the market largely expects right now.
We’re probably in the “return to “normal”” part right now, and the most recent upswing was a bull trap. The “New Paradigm” top was likely the moment when many thought that interest rates could be kept very low for decades and during the crypto peak.

Even the name makes perfect sense in light of yesterday’s news and the current expectations. The “return to normal” in this case, means a return to “normally” low interest rates.

So, what does that all imply? That the market is likely to be surprised – negatively so. It’s obvious also from the technical point of view, and I’ve been writing about the bearish stock price forecast for quite a long time now.
Stocks just failed to move to new 2023 highs. They got close but declined shortly thereafter. It looks like we’re going to get the right shoulder of the head-and-shoulder top formation completed in the following weeks.

Commodities like crude oil and copper are already declining, and so do their producers.

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Iran’s Arvandan Oil &Gas Company keen to develop Arvand oil field

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Warren Buffett says American banks could face more turbulence ahead, but deposits are safe

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Is Crude Oil likely to move down to the 64,58 level?
Uptrend scenario
An uptrend will start as soon, as the market rises above resistance level 73,03, which will be followed by moving up to resistance level 80,97.

Downtrend scenario
The downtrend may be expected to continue, while market is trading below resistance level 73,03, which will be followed by reaching support level 64,58.
Monthly forecast, May 2023
Uptrend scenario
An uptrend will start as soon, as the market rises above resistance level 73,03, which will be followed by moving up to resistance level 82,98.

Downtrend scenario
The downtrend may be expected to continue, while market is trading below resistance level 73,03, which will be followed by reaching support level 64,58 and if it keeps on moving down below that level, we may expect the market to reach support level 59,06.

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Firm as Strong Jobs Data, OPEC+ Cuts Ease Recession Fears

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Oil traders downplaying concerns over demand and global oversupply, while shifting focus to US inflation data and Chinese economic indicators.

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Daily WTI Oil traders are trying to establish new higher support a $ 68.49 (S2). If successful, it could drive prices into $72.57 (S1). Since the trend is down, sellers are likely to come in on the first test of this area. Overcoming it, however, could trigger the start of an acceleration to the upside with $78.02 the next potential target.

On the downside, a failure to hold $68.49 (S2) will be a sign of weakness. This could be the trigger point for an acceleration into (S3) at $63.04.

Essentially, the near-term direction will be controlled by trader reaction to $68.49.

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US Inflation Data Release to Impact Markets
On Wednesday, the United States is scheduled to release its consumer price inflation data for April. This report could offer more insight into interest rate changes. It is widely anticipated that the U.S. Federal Reserve will stop increasing rates, and this data could confirm those expectations. Additionally, traders will closely monitor various Chinese economic indicators this week. This includes trade, inflation, lending, and money supply figures for April. This will help market participants evaluate the economic recovery of the world’s second-largest oil consumer. As a result, crude prices may continue to benefit from the upward momentum.

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For traders looking to take advantage of the market's movements, it may be best to wait for signs of exhaustion before making any significant moves. This means looking for indicators that the market is running out of steam, which could include the formation of specific types of candles on a daily timeframe. I would not get involved in lower timeframes now.

Be Patient
However, it's worth noting that short-term traders may be able to take a risk and capitalize on the rebound that has occurred. While they may be fighting the overall trend of the market, there is still potential for profit in the short term.

Ultimately, the next few sessions are likely to be quite noisy as the market adjusts to the recent movements. However, for those who are patient and willing to wait for signs of exhaustion, there may be significant opportunities for profit in the days and weeks ahead.

At the end of the day, the crude oil market is experiencing significant volatility as investors grapple with several different factors that are affecting its value. While there are signs that a hard floor may be in place for the short term, there are still plenty of opportunities for profit for those who are patient and willing to wait for signs of exhaustion.

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Crude is starting to Fall again... The correction is over
we go deeper again

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Fed says banking sector looks set to weather recent turmoil
"The Federal Reserve is prepared to address any liquidity pressures that may arise and is committed to ensuring that the U.S. banking system continues to perform its vital roles," the Fed said.

While the central bank noted there were spillover concerns following the failures of Santa Clara, California-based SVB and New York-based Signature, it maintained that the issues that sank those regional banks do not appear broadly across the banking sector, calling them "outliers" in terms of heavy reliance on uninsured deposits.

Those firms, as well as First Republic Bank, which was closed by regulators earlier this month and sold to JP Morgan Chase, also were grappling with large amounts of unrealized losses spurred by rapidly rising interest rates. Depositors fled SVB within days after it appeared the firm was in trouble, precipitating its abrupt closure.

The Fed noted in its report on Monday that more than 45% of bank assets reprice or mature within a year, suggesting there is not heavy exposure to less valuable securities for long periods of time. But while the amount of uninsured deposits at banks is declining, they still remain above historical averages after an influx of deposits spurred by the COVID-19 pandemic. In aggregate, it said banks remain well-capitalized.

DEBT LIMIT CONCERNS
The Fed released the report shortly after a separate central bank survey found banks were tightening credit standards amid weaker loan demand.

Beyond banks, the Fed said pressures on various market sectors remained within historical norms. However, it noted that valuations on commercial real estate remain high, which suggests there could be a "sizable" correction in property values should telework trends remain strong. The Fed found that banks hold about 60% of commercial real estate loans, with two-thirds of those at smaller lenders with less than $100 billion in assets.

The Fed's report also found that nearly half of its respondents identified the U.S. debt limit as a salient risk, after not appearing as a top concern in the previous report in November. U.S. Treasury Secretary Janet Yellen said the limit could be reached in June, but Democrats and Republicans are still sparring over what conditions, if any, should be attached to an increase.

Banking sector stresses were identified as a risk by more than half of respondents, up from 12% in the November report.

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Massive losses for weeks
Why the oil price is currently showing a boost again
Last week Wednesday we reported on the sharp drop in oil prices. From the 12th. April to 3. May it was a $ 13 crash in WTI oil! And then came the turn. The price plunged really hard into the basement last Wednesday to almost $ 65. Let's ignore short-term exaggerations, then the WTI oil price last week saw Thursday at low levels around $ 67.60. Since then it has been going up to $ 72.52. In the chart we can see the course since the 11th. April.
Oil price rises noticeably – Correction of exaggeration
The oil futures market has been driven by fear of a recession in the United States for the past few weeks. As a result, there seems to have been a negative exaggeration in the oil price crash. If many important traders think, now having to take short wins with you – because it's time – then you like to see such a quick recovery in the oil price, because the traders can only smooth their shorts through purchases.

Recession in the United States?
Will the recession in the US – if it is actually rolling – significantly reduce the demand for oil, which could justify the already falling oil price? Well, on Friday at 2:30 p.m. they showed US labor market data for April: The US unemployment rate drops to 3.4% ( forecast 3.6% ). And: 253,000 new jobs were created in the USA in April ( Forecast + 180,000 ). So the US economy is running more robust than many analysts thought. Does that mean for the oil price? Possibly oil demand will continue to be at a higher level, which the futures market immediately priced in. Since Friday at 2:30 p.m. we have seen an increase in American WTI oil of $ 2.

Bloomberg statements
While fears of a US recession and bank collapse have recently unsettled the markets and pushed the oil price ( crude oil ) to its lowest level since the end of 2021, signals from physical demand indicate that at least part of the recent price weakness may have been exaggerated, Bloomberg said. On Monday, the dollar was weaker for the fifth day in a row, favoring the prospects for raw materials.

This week, traders will receive a number of forecasts about the development of the second half of the year. The OPEC publishes its monthly overview on Thursday, and before that US Energy Information Administration on Tuesday their short-term outlook. The world's largest oil producer, Saudi Aramco, will also announce its results.

The price of crude oil fell by around 11% this year as the most aggressive tightening campaign of the Federal Reserve Fears of an economic slowdown or recession in the United States have been fueling for a generation, although most investors now expect monetary policy makers to suspend interest rate hikes. The decline came despite one surprising cut in production through OPEC and its allies, including Russia. However, there is little evidence that Moscow has so far reduced its production despite the promise to do so.

The recent weakness in the oil price could reflect „ an excessive increase in real economic damping, especially given the financial interdependencies “, said Vishnu Varathan, Asia chief for economy and strategy at Mizuho Bank. There is now a risk of a further „ OPEC offer reaction or at least a buckling of the group in an attempt to support the prices “, he said.

According to data, speculators have expanded their bets against the oil markets significantly last week. Money managers saw the greatest increase in their short positions on the European diesel market and at the same time increased them to Brent as much as since March last year. The US crude oil and diesel markets also saw an increase just a few weeks after the OPEC + cut to contain the bear market.

Goldman Sachs has blamed the drop in oil prices over the past three weeks for a „ mostly macro-financial sale “, according to analysts like Daan Struyven. The bank assumes that the world market will tend to „ major deficits “ in the second half of the year, which speaks for higher prices. The prompt spread for the global reference variety Brent – the difference between the two closest contracts – was last 26 cents per barrel in backwardation. The value fluctuated between 37 cents and 15 cents per barrel in backwardation last week.

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Inflation: Companies rely on the principle „ Price before quantity “

The current reporting season in the USA has confirmed again what has emerged everywhere in the past few months: the companies are relying on a new strategy. Instead of increasing sales figures, they are now increasingly relying on higher prices in order to achieve their sales and profit targets. This affects almost every industry. From car manufacturers to hoteliers, more and more companies are foregoing sales volumes in favor of higher prices. Sometimes they do this on purpose, sometimes they have no choice. So far, the strategy has worked, as the predominantly good quarterly figures show. Consumers still seem to ignore the high inflation ( ) and are still willing to pay the higher prices. This dynamic makes it harder for the Fed to fight inflation,and she could also be for others Central banks prove to be a problem.

Price increases as a driver of inflation
If one goes according to the statements in the recently published quarterly reports, the companies will not move away from the principle “ price before quantity ”. Already at the height of the pandemic, the strategy was the preferred choice in certain industries because the supply chains were significantly disrupted.

Example Ford: The carmaker maintains the higher sales prices, even if fewer cars roll off the assembly line. Example Marriott: The hotel operator increases room prices, especially for corporate customers. Southwest Airlines also relies on the principle: the airline achieves record sales in view of the limited flight capacity and keeps prices high. As the main vacation time is approaching, price power is not expected to fade, Bloomberg said.

With the US consumer price data for April, economists surveyed by Bloomberg expect inflation to remain unchanged at 5%. Before that, the inflation slowed down for nine months in a row. “ Inflation will prove to be far more persistent, pronounced and problematic for the US Federal Reserve in the summer than expected ”, says economist Samuel Rines, Managing Director at Corbu.

In the US automotive sector, new car prices are not far from their record values. The average monthly rate was $ 754 in March, almost one sixth of the average net income of US households. The surge in prices is likely to worsen as automobile manufacturers want to switch their fleets to more expensive electric models.

Inflation: pandemic aftermath
Already in the Corona pandemic, Ford and its competitors recognized that the serious chip bottlenecks also meant that you could make more profit with less produced cars.

For airlines, it is the lack of trained pilots and the backlog of new aircraft and spare parts that hinders sales. Southwest could have offered up to 8% more flight capacity in March if it had enough staff.

The capacity bottlenecks combined with the strong demand enable the industry to charge high prices, especially for transatlantic flights. The average price for a return flight to Europe is $ 1,032. This makes them 35% more expensive than last year and 24% more expensive than before the pandemic, as data from the Hopper rice search engine show. The figures suggest that international airfares will reach their highest level in five years this summer.

Companies support their profitability with price increases
The hotel industry has also adapted to the current consumer environment. According to market observer STR, US overnight prices rose by more than 10% in the first quarter, while occupancy only increased by around 6.

One reason for this is the changed demand mix: Leisure travelers have returned faster than customers than business travelers, which focuses demand on weekends. However, the owners have gotten used to operating hotels with lower occupancy but also lower cleaning costs.

“ The pandemic has lost a lot of staff, but has also gained a lot of pricing power ”, says Jan Freitag, director of the hotel analysis area at CoStar.
The producers of consumer bulk goods also put margin on sales: the Kimberly-Clark Corp. from Dallas, Texas, which produces Kleenex towels and toilet paper, increased prices in all categories by 10% in the last quarter. In view of this, sales decreased by 5. However, the gross margin rose to 33% from around 30% a year ago.

“ Therefore, when the price of toilet paper rises, you generally do not go to the toilet less often, do you? ” CEO Michael Hsu said at last month's press conference.

Rines notes with investors the expectation that companies will support their profitability with price increases. “ Companies do it everywhere, that's clear to see ”, he says. “ And if companies can't do it, they will be put under pressure. ” On the other hand, there is a risk of being attacked by consumers or politics.

Diana Gomes of Bloomberg Intelligence still sees the gross margin of the consumer goods companies she observes below the 2019 level. This suggests that the price increases so far only offset the increases in raw material and supply chain costs.

With a view to the fight against inflation, prices for travel and hotel accommodation for the Fed represent the biggest problem.

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Russia and India: dispute over payment of oil supplies

India and Russia have temporarily suspended talks about paying Russian oil supplies. This happened after discussions on the sidelines of the Shanghai Cooperation Organization ( meetingSCO). The discussion focuses in particular on the payment of oil exports to India. Russia is now threatening to suspend the delivery of S-400 ground-to-air missiles. The two BRICS countries cannot agree on payment in Yuan or Dirham. This gives an insight into the complex reality of the relations between the BRICS countries, which actually dream of it, to break the dominance of the US dollar.

India and Russia: Suspension of talks on payment of Russian oil supplies
After discussions on the sidelines of the SCO meeting, India and Russia suspended their talks about paying for deliveries from Russia. The general question was how Russia's exports are paid, but in particular how oil exports are paid to India.

Russia needs the money to fund its war against Ukraine. Until the West's sanctions against Russia following the invasion of Ukraine, trade between the two countries was settled in US dollars. Since this path has been blocked, the two countries have been looking for a different solution. This is made more difficult by the fact that India has introduced strict exchange controls, which means that any amount in rupees must first be exchanged for US dollars, before it can be converted to a third currency. This threatens any transaction between India and Russia that an Indian bank carries out.

No payment in BRICS currencies
A way out would be the regulations of the BRICS countries, which include both countries and which would allow payment either in Yuan or in Dirham ( AED ). India, however, refuses to accept the yuan for paying oil delivery bills and last month asked the banks „ “ not to process transactions between Indian and Russian traders in yuan. Russia in turn accepts the dirham not.

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In the meantime, the amounts due for the oil deliveries have been set up to an Indian account in Rupee, to which Russia has access but cannot execute the money.

Russia demands payment for oil deliveries
Russian Foreign Minister Sergei Lavrov, expressed during a press conference in Goa on 5. May 2023 bluntly that India apparently wants to dance to two weddings in its business relations with Russia. India has used cheap Russian oil for both domestic consumption and export as refined products, but has not adequately compensated Russia for its oil imports.

Lavrov pointed out that Russia has accumulated billions of rupees on Indian banks that Russia cannot use. „ This is a problem. We have to use this money. But for that, the rupees have to be converted into another currency, and this is currently being discussed. “

Russia is now threatening not only to suspend the delivery of cheap Russian oil, but also to suspend the delivery of S-400 surface-to-air missiles. India and Russia have a long weapon technology partnership that allows India to purchase modern military equipment at low cost without being dependent on the United States. India's Defense Minister Rajnath Singh and his Russian counterpart, Sergei K., met at the SCO meeting. Shoigu, in New Delhi, where it is among other things the production Russian systems in India went. The fact that Russia could not deliver the S-400 could also be due to the fact that Russia simply has no S-400 left for export due to the Ukraine war.

Rivalries in BRICS and SCO prevents cooperation
The conflict over India's payment of Russian exports is interesting on several levels: Russia and India are both BRICS member states, and one of the goals of cooperation from the start was, break the dominance of the US dollar and initially trade in local currencies, later the US dollar through its own currency to replace.

Only in the past few weeks has the discussion about a BRICS replacement currency picked up new momentum, according to Lavrov's statements. China in particular hopes for it, that the yuan will become this replacement currency. However, it is now becoming apparent that the BRICS partners are neither able to handle trading in local currencies nor to agree on an internal third currency ( Dirham or Yuan ).

It becomes clear once again that there is also a simple technical problem: practically all currencies in the BRICS countries are not freely convertible and pegged to the US dollar. The rivalry between India and China plays a special role in this. India, as the fifth largest economic nation, does not recognize China's leadership, and without this powerful economic power there will be no common currency.

India and Russia are also organized in the SCO and also have a long security partnership. The payment dispute would be another link that could weaken this partnership.

Arms deliveries from Russia are falling
According to the SIPRI Peace Research Institute, Russian arms exports decreased to eight of the ten largest recipients between 2013-2017 and 2018-2022. Exports to India, the largest recipient of Russian weapons, decreased by 37 percent, while exports to the other 7 recipients fell by an average of 59 percent. However, Russian arms exports to China ( + 39 percent ) and Egypt ( + 44 percent ) rose, and they became the second and third largest Recipients Russia.

„ It is likely that the invasion of Ukraine will further restrict Russian arms exports. This is because Russia will prioritize supplying its armed forces and demand from other countries due to trade sanctions against Russia and increasing pressure from the United States and its allies, Buying no Russian weapons will remain low “, said Siemon T. Wezeman, senior researcher at the SIPRI arms transfer program.

India will have to look for other arms suppliers ( ). They could end up with European or American manufacturers because cooperation with China is ruled out for obvious reasons. BRICS and the SCO once again prove to be fake giants.

India's economy cannot take advantage of the opportunities in Russia
India's economy would have a unique opportunity to sell its goods in Russia and thus replace western products in Russia. However, there are two weaknesses in India.

For one thing, Indian products are qualitatively unable to compete with Chinese products that are dominant in Russia. India is therefore also a substitute for China, which is struggling with the withdrawal of production capacity in the course of decoupling with the USA.

India would be the only country on earth to have the mass of workers to compete with China. This would require a series of domestic and foreign policy reforms that should shield the Indian market from foreign competitors, but now prevent Indian productions from being competitive on the world market. So far, multinational corporations in India have practically only produced for the domestic market. And even disposition within India is a challenge due to the weak infrastructure, the domestic customs borders and legislation.

Complex challenges of the BRICS initiative
The dispute over the payment of Russian exports between India and Russia highlights the complex challenges facing both countries. While trying to break the dominance of the US dollar and strengthen its cooperation in the BRICS and SCO organizations, rivalries and technical obstacles are also revealed. The inability to find a common solution to pay for Russian oil supplies underscores the difficulty in creating a stable alternative currency and raises questions about the future of the BRICS initiative.

But it also highlights India's domestic politics, which, in the desire to shield the Indian economy, is now preventing India from rising further.

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How Russia lowers the veil over oil and gas
A government decision stipulates that Russian oil and gas production data should no longer be published by April 2024. To put pressure on oil prices, Russia had one Funding restriction imposed. It is important to avoid that it could get out of hand. Because India's demand for Russian oil is booming.

India takes more oil from Russia than ever before
In February, India imported one based on data from the Indian Ministry of Trade and Industry, according to RIA Novosti calculations Record quantity of Russian crude oil in the amount of 6.3 million tons. In January, deliveries would have been six million tons. The daily volume in barrels rose from 1.48 to 1.55 million. With a share of 27.4 percent, Russia took the top spot among India's most important oil suppliers in February. Iraq followed in second place with 15.8 percent and in third place Saudi Arabia with 15.5 percent. Overall, according to India, Ria Novosti, imports of crude oil and petroleum products from Russia cost a record $ 3.9 billion in February, 42 times more than in the previous year.

This development shows how strongly India is involved in the Russian calculation to circumvent sanctions using oil mixtures. In March, Russia exported based on data from Vortexa 91 percent of crude oil to China and India, the Turkish news agency Anadolu Ajansi reported in April on the export situation in Russia. According to the Russian media, Vice Prime Minister Alexander Nowak spoke about the importance of the Asian sales market at a board meeting of the Moscow Institute for Energy Technology ( MPEI ) on 27. April. According to him, Russia is planning this year 140 million tonsExport oil and oil products to Asia. That is 60 percent of exports. 40 percent and thus 80 to 90 million tons are planned for Europe. Even if this turns the ratio for oil deliveries to Asia and Europe, oil products such as petrol and diesel can still reach Europe in abundance. China and India are expanding their refinery capacities.

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OPEC action works: Collapse super tanker freight rates

The OPEC had. April announced, the oil production will be reduced by 1.15 million barrels per day from May. This means less oil delivery for the world market. Apparently, this measure now has a clear effect. The utilization of super tankers that transport oil across the world's oceans seems to be falling so noticeably that the daily rents for these tankers have collapsed ( Supply and demand ).

The benchmark rates for oil tankers have dropped by three quarters because OPEC + made its surprising promise of 2. April to cut the offer to support prices, put it into practice and reduce the quantities shipped across the world's oceans, Bloomberg currently says. According to the Baltic Exchange, ships carrying 2 million barrels of crude oil from the Middle East to China earned the 5th on Friday. April slightly less than $ 24,000 a day, compared to more than $ 97,000 on the 20th. March. This has damaged the share prices of listed owners such as DHT Holdings and Frontline PLC.The decline in freight rates for super tankers marks a turning point in market activity. For almost a year, tanker prices had been boosted because the ships had to continue driving because the buyers were looking for replacements for Russian oil. This –, along with the release of US oil reserves –, had caused earnings to rise above $ 100,000 a day for the first time since 2020.

However, in recent weeks, OPEC + has shocked the oil market by announcing a number of major cuts in funding, reducing the number of cargoes to be transported for ships. The mood on the crude oil market was also affected by concerns about global growth, and after an increase in Chinese imports, the number of ships returning to the Middle East has increased, which has increased the range of rental ships.

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USA: Debt ceiling – Loss of credit insurance costs explode
USA: Demand for credit default insurance is increasing
The mess has skyrocketed demand for euro-denominated US credit default swaps that are traded the most. These contracts for a default next year were traded on Wednesday at 166 basis points. They reached a record high and exceeded the levels reached during previous unrest over the US debt ceiling in 2011 and 2013.

Trading has picked up momentum due to the peculiarity of the derivatives market, which enables owners to achieve substantial returns in the event of a default. Your payment corresponds to the difference between the market value and the nominal value of the underlying asset – an attractive investment if long-term government bonds are traded particularly cheaply. According to Bloomberg calculations, the potential payout could exceed 2,400.
Emerging markets would be most affected
According to Simon Waever, an analyst at Morgan Stanley, the outstanding net nominal volume of US CDs with $ 5.5 billion is now comparable to many larger emerging markets. Ironically, emerging markets will be most affected by any impact on the overall market.
The anomaly is limited to one-year CDS. Five-year contracts, which are usually more liquid and better reflect the assessment of a country's longer-term credit risk, have also increased in the United States, but are still traded about 100 basis points below the one-year terms. This reverse curve indicates that the risks in the immediate future are considered to be higher than in the longer term.
The CDS price reflects the cost of insurance for a very large loan in a very small insurance market, said Charles Diebel, head of Fixed Income at Mediolanum International Funds

Nota

What is the debt ceiling?
The federal government operates in a deficit, spending more than it brings in with taxes, so it’s forced to borrow money to pay for everything from the salaries of armed forces and federal employees to Social Security

Congress has the power of the purse strings, letting it set a limit on what the government can borrow to pay for expenses (the debt ceiling). The current limit is $31.4 trillion.

What happens if the debt ceiling is not raised or suspended?
When does the U.S. hit spending limit?
How many times has the debt ceiling been raised?

How much has the U.S. debt increased in the past 20 years?

What caused the debt?
Answers here

#US100: Real Estate CRASH and China's trade Collapsing

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Why Say Recession at All Given How Much Inflation Has Come Down Already?

Because when you dial into the Fed statements over the past several months, they believe anything short of recession will not truly stamp out the flames of inflation. If they just slow down the economy to touch their 2% inflation target, they fear that the remaining embers could reignite higher inflation in the months following.

So, under the heading “Don’t Fight the Fed” probably best that we take them at their word that a recession is coming. And when it is finally on the scene, that is when bears will take charge and stocks will retrace to the previous low of 3,491...and probably lower.

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Is high US inflation good or bad for Crude Oil?
No one was naïve enough to expect an agreement on the US debt ceiling yesterday, when US President Joe Biden met Kevin McCarthy.

US treasuries remain under a decent selling pressure especially at the short end of the yield curve as investors dump US short term papers due to the rising US default risk. Gold gained, as equities slid.

The US will reveal a much-important update to its CPI today, and the data could also shake sentiment at today’s trading session.

Core inflation is expected to have slightly eased from 5.6% to 5.5% in April, headline inflation is seen steady at 5%, while we might see an uptick in monthly headline figure, to 0.4% from 0.1% printed a month earlier due to the spike in energy prices after OPEC cut production last month.

A CPI report in line with expectations will keep focus on debt ceiling, but a report that diverges from expectations could give an extra spin to market pricing. A softer-than-expected CPI report should further fuel the Fed rate cut expectations into this fall and relieve a part of the positive pressure on US yields, whereas a stronger-than-expected read will hardly boost any hawkish bets.

Inflation as measured by the annual gain in the U.S. Consumer Price Index (CPI) set a 40-year high in March 2022 amid COVID-19 supply disruptions. Crude oil prices were the highest in a decade as the U.S. and its allies imposed sanctions on Russia due to its invasion of Ukraine.
Higher oil prices contribute to inflation directly and by increasing the cost of inputs.
There was a strong correlation between inflation and oil prices during the 1970s.
Oil's potential to stoke inflation has declined as the U.S. economy has become less dependent on it.
Oil prices exert a greater influence on producer prices because of oil's role as a key input.
Some argue that costly renewable energy could re-strengthen the correlation between energy costs and a higher infIs Inflation Good or Bad for Oil Prices?
It depends on the time frame. In the short term. higher inflation tends to lead to higher oil prices. In the longer term, if the Federal Reserve raises interest rates and slows economic growth to control inflation, oil prices could decline as a result.lation rate.

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Shifting Trends
Crude oil was a bigger contributor to inflation in the 1970s, when it was used much more intensively per unit of economic output. Back then, the U.S. economy consumed more than a barrel of crude per $1,000 of gross domestic product. By 2015, that had dropped to about 0.4 barrels per $1,000 of GDP.
5

Reduced reliance on energy, and in particular crude oil, promoted disinflation, or the decline in the inflation rate.

Spot oil prices have retained a strong correlation to market measures of long-term inflation expectations, however.
6

Some analysts have argued that the recent correlation between crude's diminished importance as an economic input and a lower inflation rate may no longer hold as oil is supplemented by less climate damaging but more expensive renewable energy sources and global supply chains give way to costlier domestic or regional sourcing.
7

Goods Producers Pay the Price
Historically, oil prices have exerted more influence on the Producer Price Index (PPI), which measures the prices of goods at the wholesale level, than the CPI, which measures the prices consumers pay for goods and services.

Between 1970 and 2017, the correlation between oil prices and the PPI was 0.71. That's much stronger than the 0.27 correlation with the CPI, according to the Federal Reserve Bank of St. Louis.
8

"The weaker link between oil prices and consumer prices likely comes from the relatively higher weight of services in the U.S. consumption basket, which you’d expect to rely less on oil as a production input," according to the St. Louis Fed.
8

The Federal Reserve's preferred inflation measure, the personal consumption expenditures price index, has a lower gasoline weighting than the CPI.
9

Is Inflation Good or Bad for Oil Prices?
It depends on the time frame. In the short term. higher inflation tends to lead to higher oil prices. In the longer term, if the Federal Reserve raises interest rates and slows economic growth to control inflation, oil prices could decline as a result.

What Type of Inflation Would Be Triggered by an Increase in Oil Prices?
Oil prices have historically had a greater impact on the Producer Price Index (PPI) than on CPI. PPI measures the price of goods at the wholesale level.

What Other Factors Can Cause Oil Prices to Rise?
In addition to the demand for oil to produce a host of products plus its use by the transportation industry, other factors that can cause oil prices to rise include geopolitical tensions, tight supply, and growing economic strength.

The Bottom Line
While the price of oil has historically correlated with inflation, that relationship has become less pronounced since the 1970s. The loosening of this correlation is likely a result of the growth of the service sector which uses energy less intensively than manufacturing.

Since oil is a key input in manufacturing and a major cost factor in shipping, oil prices have tended to have a greater effect on the cost of goods than services, which also explains the relatively weak correlation between oil and CPI and the strong one between crude and PPI.

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Oil Declines on Demand ConcernsCommodity
WTI crude futures fell toward $70 per barrel on Wednesday, extending losses from the previous session as weaker-than-expected economic data from the US and China hurt the demand outlook in the world’s two biggest oil consumers. Oil prices also declined after industry data showed that US crude inventories unexpectedly increased by about 3.6 million barrels last week, defying forecasts for a 900,000 barrel drawdown. Moreover, investors remain cautious while awaiting development on US debt ceiling negotiations, as Treasury Secretary Janet Yellen reiterated her warning that the government needs to raise the limit immediately to avoid a possible default in June. Meanwhile, the International Energy Agency upgraded its global oil demand forecast by 200,000 barrels per day and said it expects tighter market conditions in the second half of the year, according to its May report.

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US Crude Stocks Post Biggest Gain in a 12 Weeks
US crude oil inventories rose by 5.04 million barrels in the week ending May 12, 2023, the biggest weekly increase in 12 weeks, compared with market expectations of a 0.92 million drop, data from the EIA Petroleum Status Report showed. Also, crude stocks at the Cushing, Oklahoma delivery hub were up by 1.461 million barrels, the most since end-January and following a 397 thousand rise in the previous period. On the other hand, gasoline inventories fell by 1.381 million, more than forecasts of a 1.06 million draw; and distillate stockpiles, which include diesel and heating oil, were up by 0.08 million barrels, above the consensus for a 0.057 million rise.

Nota

US Housing Starts Unexpectedly Rise
Housing starts in the US unexpectedly increased 2.2% month-over-month to a seasonally adjusted annualized rate of 1.401 million in April of 2023, compared to market forecasts of 1.4 million. Data for March was revised sharply lower to 1.37 million from 1.42 million, as high prices, interest rates, and tighter lending standards continue to weigh. Single-family housing starts, which account for the bulk of homebuilding, increased 1.6% to a four-month high of 846K and starts in buildings with five units or more surged by 5.2% to 542K. Starts rose in the West (34.6% to 315K) and the Midwest (32.6% to 171K) but fell in the Northeast (-23.4% to 131K) and the South (-6.3% to 784K).

Nota

The yield on the US 10-year Treasury note continued to march higher to top 3.6%, a level not seen in nearly two months, as investors follow the debt ceiling standoff and try to assess the Fed's next steps. Congressional lawmakers and President Biden expressed optimism on a deal and said the US will not default. At the same time, bets the Fed will cut rates this year fell and the chances of a pause in rate hikes in June also weakened. Dallas Federal Reserve President Lorie Logan said Thursday current economic data doesn't justify yet pausing the rate hiking-cycle. Retail sales data released this week showed consumer spending remained resilient and initial claims fell more than anticipated.

Nota

WTI crude futures steadied around $72 per barrel on Friday and were set to finish the week higher, underpinned by a solid demand outlook and various supply-side disruptions. Global oil demand is expected to exceed supply by 2 million barrels per day in the second part of 2023 with China accounting for a substantial part of it, an IEA projection showed. The US government also announced earlier this week that it would purchase up to 3 million barrels of crude oil to replenish its depleted Strategic Petroleum Reserve, with deliveries planned for August. On the supply-side, wildfires in major oil-producing regions in Canada and the seizure of oil tankers by Iran threatened to disrupt flows. Meanwhile, latest data showed that US crude inventories unexpectedly jumped by 5.04 million barrels last week, the most in twelve weeks due to another release from the SPR. Investors also continued to assess the economic outlook in the US and China, two of the world’s biggest oil consumers.

Nota

Friday26.May is the Big Day of this week
US Stocks Lack Direction as Investors Eye Debt Ceiling and Inflation report

the yield on the US 10-year Treasury note rebounded from early losses to trade slightly higher at 3.7%, the highest since mid-March, as traders assess the monetary policy outlook and the debt ceiling impasse in the US. On Monday, Fed’s Kashkari said a June rate pause or hike is a close call and St. Louis Fed President Bullard said the Fed may still need to raise rates by another half-point this year. Last Friday, Fed Chair Powell mentioned that because of stress in the banking sector, it might be unnecessary to further raise rates to curb inflation. The likelihood of a pause in the rate hike cycle has been fluctuating, but currently, traders are assigning a 78% probability that the Fed will maintain the rates steady in June. Simultaneously, President Biden is scheduled to meet with House Speaker Kevin McCarthy on Monday to continue negotiations regarding the debt ceiling. This follows an unsuccessful meeting between key negotiators on Friday.

US stocks traded around the flatline on Monday, as investors remain concerned about the sustainability of US government debt. President Biden and House Speaker Kevin McCarthy are set to continue negotiations on the debt ceiling today following a failed meeting on Friday. Treasury Secretary Yellen said on Sunday that the likelihood of the Treasury paying all US bills by June 15th is quite low. Meanwhile, traders continue to follow comments from several Fed officials: Fed’s Kashkari said a June rate pause or hike is a close call and St. Louis Fed President Bullard said the Fed may still need to raise rates by another half-point this year. On the corporate front, shares of Micron Technology fell nearly 4% after China banned some Chinese tech manufacturers from using the company's chips. Stocks of Apple were also down about 1% after Loop Capital downgraded its stock to hold from buy. Meta stocks were also under pressure after the firm has been fined by European regulators.

US futures were around the flatline on Monday, as investors remain concerned about the sustainability of US government debt. President Biden and House Speaker Kevin McCarthy are set to continue negotiations on the debt ceiling today following a failed meeting on Friday. Meanwhile, Treasury Secretary Janet Yellen said on Sunday that the likelihood of the Treasury paying all US bills by June 15th is quite low. On the corporate front, shares of Micron Technology fell more than 4% in premarket trading after China banned some Chinese tech manufacturers from using the company's chips. Stocks of Apple were also down about 1% after Loop Capital downgraded the company’s stock to hold from buy. Meta stocks lost nearly 1% after the firm has been fined a record €1.2 billion by European privacy regulators.

Nota

Selling Pressure,Weakenning of UsDollar, thats good for Euro. Strong Euro is GOOD,no VERY GOOD for SP500;NASDAQ;DOW JONES; GOLD;BITCOIN;CRYPTOS: Everything against Dollar.

Look also my NVIDIA Forecast Chart performed: Nailed it! Weak US DOllar also good for Tech Stocks, Bio Pharma and Tech have Highly positive correltions with Bitcoin and Ethereum, and vice versa. NVIDIA : Top Performer

Friday is the Big Day of the Week: aND IT WILL BE VERY BUISY. RGHT AFTER THE bELL PMI and Inflation DATA!

Nota

The Fed meets next week and expectations of another rate increase are rising, particularly given the growing hopes the U.S. economy is headed for a 'soft landing' after Congress's approval last week of a debt ceiling deal that averts U.S. default.

The Fed enters its traditional blackout period this week, but there is more data to digest, including the ISM services PMI later Monday, which is expected to point to a still solid rate of expansion.

Nota

Asian Stock Market: Bulls and bears jostle at monthly top ahead of central bank decisions
Asia-Pacific shares grind near one-month highs amid cautious mood.
Softer Japan inflation, hopes of no PBOC rate hike underpin mildly positive risk appetite.
Holidays in Australia, light calendar elsewhere join pre-Fed anxiety to limit market moves.

Gold price is looking to extend Friday’s pullback from five-day highs of $1,973 on Monday. Despite the retreat, Gold price maintains its last week’s range, as investors turn cautious ahead of a big week, with eyes on the United States (US) Consumer Price Index (CPI) and US Federal Reserve policy announcements

USD/JPY strengthens beyond mid-139.00s on modest USD uptick, lacks bullish conviction

Bank of Japan's Dovish Line Pushes Yen Down

USD/CHF Price Analysis: Bounces off 200-SMA but recovery remains elusive below 0.9100

USDCHF BEARISH Meets monthly Low and Support

GBPUSD SHORT on hawkish FED
SHORT

DAX40 Will Rise much more Higher
LONG

Nota

US Fed, BOJ, ECB Are Set to Announce Policies This Week

Nota

US Dollar Index: DXY fades recovery below 104.00 on downbeat Fed bets, US inflation eyed
US Dollar Index struggles to extend the previous day’s corrective bounce off three-week low, snaps two-day winning streak.
Markets remain nearly sure of witnessing no rate hike from Fed in June but concerns about July stay dicey.
Bond market moves, challenges to sentiment prod DXY bears ahead of the key US CPI.
Core CPI will be closely observed as high inflation can allow FOMC to remain hawkish despite no rate hike decision.
US Dollar Index (DXY) remains pressured around 103.60 as it fades the previous two-day winning streak on Tuesday as the key US inflation data looms. That said, the greenback’s gauge versus the six major currencies rose in the last two consecutive days amid the market’s positioning for the Federal Reserve’s (Fed) pause to the rate hike trajectory. However, the recently mixed concerns about the US central bank’s future moves join the challenges to the sentiment to prod the DXY buyers ahead of an important data point for the markets.

It’s worth noting that a study from the San Francisco Fed about the correlation between wage growth and inflation could be cited as the reason for the US central bank to remain less hawkish, which in turn weighs on the DXY, apart from the pre-data anxiety. The survey concluded that wage growth has a very small impact on inflation, which in turn raises doubts about the central bankers’ emphasis on wage cost numbers as a source of information to gauge inflation pressure.
Talking about the latest challenges to sentiment, a trade dispute is developing after the US expands its ban on imports from Xinjiang. China vows to protect China firms against any US sanctions, per Reuters. Recently, Bloomberg released prepared remarks of US Treasury Secretary Janet Yellen’s scheduled Testimony in front of the House Financial Services Committee as she said that the International Monetary Fund (IMF) and the World Bank (WB) serve as important counterweights to nontransparent, unsustainable lending from others, like China.
Additionally, the increase in the bets favoring the Federal Reserve’s (Fed) 0.25% rate hike in July also prod optimism and put a floor under the US Dollar Index. It should be noted that the CME’s FedWatch Tool suggests nearly limited scope for the US central bank to act on Wednesday’s Federal Open Market Committee (FOMC).
Looking ahead, the US Consumer Price Index (CPI) figures for May will be in the spotlight as the Fed decision looms on Wednesday. That said, the market forecasts of witnessing no change in the Core CPI MoM figure of 0.4% gain major attention as softer figures could push back the July rate hike concerns and may not allow the Fed to sound hawkish, which in turn can drown the US Dollar.

Nota

US Dollar Index: DXY licks US inflation-inflicted wounds at three-week low above 103.00 on Fed day

US Dollar Index grinds near the lowest levels in three weeks after snapping two-day winning streak.
US inflation data bolsters market’s bets on Fed’s status quo and weigh on the DXY despite upbeat yields.
Cautious mood ahead of the FOMC announcements put a floor under the US Dollar price.
Expectations of witnessing a hawkish halt from US central bank highlight qualitative updates from the Fed.
US Dollar Index (DXY) steadies above 103.00, after bouncing off a three-week low, as markets brace for the Federal Reserve (Fed) announcements on Wednesday. The greenback’s gauge versus six major currencies slumped the most in a week, to the lowest levels since May 22, after the US inflation data fuelled speculations of the US central bank’s halt to the rate hike trajectory present in the last 10 monetary policy meetings.

As per the latest US inflation data for May, the headline Consumer Price Index (CPI) drops more-than-expected and prior releases to 0.1% MoM and 4.0% YoY. However, the Core CPI, known as the CPI ex Food & Energy, matches 0.4% monthly and 5.3% yearly forecasts. It’s worth noting that the US headline CPI dropped to the lowest since March 2021 and hence justifies the market’s expectations of the US Federal Reserve (Fed) hawkish halt, which in turn should have weighed on the US Dollar.
Following the data, the CME’s FedWatch Tool suggests more than a 90% chance of the US Federal Reserve’s (Fed) no rate hike during today’s monetary policy meeting, versus around 75% chance before that.

It’s worth noting, however, that the ex-Fed Officials have been pushing for a hawkish halt to the rate hikes and prods the DXY bears. On Tuesday, Former Dallas Federal Reserve Bank (Fed) President Robert Kaplan said that he would support a "hawkish pause" at this week's meeting while also adding that he would “leave the question of a July hike open.” Previously, Ex-Boston Fed President Eric Rosengren tweeted, “Expect a hawkish skip this week.”

As a result, Wall Street benchmarks rose for the second consecutive day but the US Treasury bond yields remain firmer. That said, the US 10-year Treasury bond yields rose to a 13-day high of 3.83% whereas the two-year counterpart poked the highest levels in three months with 4.70% mark before easing to 4.67% in the last hours.

Looking ahead, the pre-Fed sentiment may prod the DXY, as well as allow the greenback’s gauge to pare recent losses. However, the traders will pay attention to the US central bank’s economic forecasts, dot-plot and Chairman Jerome Powell’s press conference for clear directions afterward, as the rate hike pause is almost given.

Nota

European equity markets were set for a positive open on Friday, tracking global peers higher amid bets that US interest rates could be nearing their peak as the American economy loses momentum and after the Federal Reserve paused its tightening campaign in June. Meanwhile, the European Central Bank opted to raise interest rates by another 25 basis points, with ECB President Christine Lagarde saying ‘we are not thinking about pausing.” Investors now look ahead to final euro zone inflation figures and wage growth data for further clues on the economy and future monetary policy. DAX futures jumped 0.9%, Stoxx 600 futures gained 0.5% and FTSE 100 futures edged up 0.2% in premarket trade.

Nota

The Dow finished more than 100 points below the flatline on Friday, the S&P 500 and the Nasdaq lost nearly 0.4% and 0.7%, respectively, as investors continued to assess the outlook of monetary policy for the Fed amid a massive options expiration at the second 2023’s quadruple witching date. Among stocks, Microsoft fell 1.7% and Micron Technology dropped 1.7%. Conversely, Virgin Galactic surged 16.3% on plans for commercial space tourism. Tesla added 1.8% after hitting a 37-week high during the session and Adobe gained 0.8% with positive earnings and guidance. On the week, the Dow Jones added 0.9%, marking a three-week winning streak despite the Fed's warning of future rate hikes. The S&P 500 gained 2.2%, its fifth consecutive weekly gain, the longest since November 2021, rising 2.2%. The Nasdaq was up 2.7% for an eighth straight positive week. Markets will be closed on Monday for the Juneteenth holiday.

Nota

Fed Chair. Powell reiterated at the ECB Forum on Central Banking that interest rates will rise further and that he wouldn’t take moving in consecutive meetings off the table at all, but noted that a recession in the US is not the most likely case. Nvidia was down by over 2% and Advanced Micro Devices by 1% after the Wall Street Journal reported that the US government is considering new restrictions on exports of artificial intelligence chips to China. The Fed is also due to release the results of its annual stress tests to banks, and more details on Basel III Endgame and changes to bank supervision will be in the spotlight.
The Dow Jones was down over 100 points and the S&P 500 dipped by 0.1% on Wednesday afternoon, on the prospect of further interest rate hikes following the Federal Reserve's chair Powell Speech at the ECB Forum. He said he does not see inflation reaching the Fed's 2% target any time soon. He reiterated that interest rates will rise further and did not rule out a boost in the cost of borrowing at the next policy meeting scheduled for the end of July. Meantime, the Nasdaq was up 0.2% powered by megacap momentum stocks. Among stocks, shares of Nvidia and Advanced Micro Devices were down by 2% and 1%, respectively, after the US government is considering new restrictions on exports of AI chips to China. Intel, Applied Materials and Qualcomm fell more than 2% each. On the other hand, Apple hit an all-time high of $189.8 during the session, while shares of Tesla and Alphabet advanced 1.4% and 2.5%. The Fed is due to release the results of its annual stress tests to banks.

Nota

The US economy grew by an annualized 2% on quarter in Q1 2023, well above 1.3% in the second estimate, and forecasts of 1.4%. The updated estimates primarily reflected upward revisions to exports and consumer spending that were partly offset by downward revisions to nonresidential fixed investment and federal government spending. Imports were revised down.

Nota

trade is open

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