MNI US OPEN - Final Two FOMC Voters Due Ahead of Media Blackout

NEWS

US (MNI): Further Tightening to Bring Stable Prices - Fed's Williams

Monetary policy still has "more work to do" to tame inflation for good, Federal Reserve Bank of New York President John Williams said Thursday, signaling further interest rate increases are in store this year. The effects of higher rates are showing up in different parts of the economy at different speeds, and while there are signs that inflation is moderating, it remains far too high, Williams said.

US (MNI): Fed QT Has Room to Run, ON RRP Key Buffer - Williams

The Federal Reserve's balance sheet reduction program is expected to continue despite bank reserves falling faster than expected to around USD3 trillion, New York Fed President John Williams said Thursday. The roughly USD2 trillion deposited in the Fed's overnight reverse repo facility will act as a buffer as demand for reserves fluctuate, he said.

MNI NORGES BANK REVIEW (MNI): January 2023 - First to Hike, First to Pause

The Norges Bank kept the deposit rate unchanged at 2.75%, alongside majority expectations. The decision marks the first time since the accelerated pace of tightening last year that the bank have declined to hike rates. The bank similarly confirmed a return to gradualism for monetary policy, acknowledging that the inflation backdrop necessitates further tightening, albeit it at a slower pace.

JAPAN (MNI): BOJ To Tweak Guidance If Covid Severity Downgraded

Considerations by Japan's government to reclassify Covid-19 in the same category as seasonal flu will likely prompt the Bank of Japan to remove “while closely monitoring the impact of Covid-19” from its forward guidance, MNI understands. The BOJ is instead expected to state it is closely monitoring developments in overseas economies that are set to slow due to the rate hikes. Officials see the degree of global economic slowdown as the biggest risk factor for Japan’s economy and inflation outlook.

CHINA (MNI): China's January Loan Prime Rate Unchanged

(MNI) Beijing - China's reference lending rate remained unchanged on Friday, according to a statement on the People's Bank of China website, which was in line with market expectations as the central bank kept a key policy rate steady on Monday.

CHINA (MNI): 5-Year LPR Cut Seen to Boost Property Recovery

China's over-five-year loan prime rate is still expected to be reduced later this quarter to support the housing market after key lending reference rates were left unchanged on Friday as confidence in an economic recovery spurs loan demand, economists said.

DATA

UK DATA (MNI): UK Retail Sales Slow In Dec As Consumer Retrenches

• UK DEC RETAIL SALES -1% M/M, -5.8% Y/Y
• UK DEC RETAIL SALES EX-FUEL -1.1% M/M, -6.1% Y/Y
• UK JAN GFK CONSUMER CONFIDENCE INDEX -45

UK retail sales fell sharply in December, as shoppers slowed their spending ahead of the Christmas break, the latest data from the Office for National Statistics showed, reflecting concerns about the state of the consumer as the cost of living bites hard.

Total sales fell 1.0% month-on-month and declined 5.8% on year -- the largest annual December decline since records began in 1989. “Retail sales dropped again in December with feedback suggesting consumers cut back on their Christmas shopping due to affordability concerns," ONS Deputy Director for Surveys and Economic Indicators Heather Bovill said.

GERMAN DATA (MNI): Core PPI Down Largely on Energy Base Effects

• GERMANY DEC PPI -0.4% M/M (FCST -1.2%); NOV -3.9% M/M
• GERMANY DEC PPI +21.6% Y/Y (FCST +20.7%); NOV +28.2% Y/Y

German producer prices proved to be more sticky than anticipated in December, falling by a more modest -0.4% m/m after the -3.9% m/m plunge in November. PPI eased by a solid 6.6pp to +21.6% y/y falling for a third month from the Aug/Sep record peak of +45.8% y/y. Energy was again the key downward driver largely due to base effects filtering in. Yet PPI energy prices fell by a weaker -1.0% m/m in December after the -9.6% m/m November plunge

JAPAN DATA (MNI): Japan's Dec Core CPI Rises 4%; Highest in 41 Years

• JAPAN DEC CORE CPI +4.0% Y/Y; NOV +3.7%
• JAPAN DEC CPI ENERGY COST +15.2% Y/Y; NOV +13.3%

Japan's annual core consumer inflation rate accelerated to a 41-year high of 4% in December, up from 3.7% in November but in line with the expectations of Bank of Japan officials, data by the Ministry of Internal Affairs and Communication released Friday showed.

The quickening pace of inflation will complicate the BOJ's efforts to maintain its easy monetary stance, especially its yield curve control policy after it kept the 50bp band around its 10-year yield target after its meeting on Wednesday.

FOREX: Markets Backtrack Thursday Moves, Putting JPY on Backfoot

• After the sharp mid-week recovery off the post-BoJ decision lows, JPY is the weakest currency across G10 Friday, helping USD/JPY re-top Y129.50. This tips the pair above the 50% retracement of the post-BoJ range, leaving Y130.05 as the next upside level.
• AUD, NZD are also bouncing, among the best performers in G10 after sliding throughout Thursday hours. AUD/USD trades in close proximity to a sizeable option expiry rolling off at today's cut: A$3.8bln rolling off at $0.6900.
• EUR/CHF saw a flurry of buying interest alongside the European open, putting the cross closer to parity and narrowing the gap with the Monday highs at 1.0054. SNB's Jordan spoke for a second consecutive day at the WEF in Davos, but provided few new details on policy.
• Canadian retail sales and US existing home sales are the data highlights Friday, with the speaker highlights including Fed's Harker and Waller - both of which are voters on the FOMC this year.

BONDS: BTPs Lead Core FI Lower

• Core fixed income has moved lower this morning, led by EGBs with BTPs in particular under pressure this morning (10-year BTP yields up 13.6bp this morning).
• The moves in Bund futures have seen them move back to around 138.50 (down around 100 ticks on the day), almost fully reversing Tuesday's rally.
• 2-year yields are up around 4bp across Schatz, USTs and gilts.
• Looking ahead, we have US existing home sales data and will hear from the Fed's Harker and Waller.
• TY1 futures are down -0-10 today at 115-10+ with 10y UST yields up 4.4bp at 3.437% and 2y yields up 4.2bp at 4.169%.
• Bund futures are down -0.99 today at 138.56 with 10y Bund yields up 8.0bp at 2.138% and Schatz yields up 4.1bp at 2.554%.
• Gilt futures are down -0.42 today at 104.45 with 10y yields up 6.9bp at 3.341% and 2y yields up 4.0bp at 3.464%.
• BTP futures are down -1.25 today at 116.28 with 10y yields up 13.6bp at 3.905% and 2y yields up 9.1bp at 2.893%.

EQUITIES: Eurostoxx Futures Trade Lower Thursday, Signalling Potential Corrective Pullback

EUROSTOXX 50 futures traded lower Thursday. The broader trend outlook remains bullish, however, the cycle is overbought and this warns of the potential for a short-term pullback. A move lower would allow the overbought reading to unwind. A continuation lower would open 4038.20, the 20-day EMA and a key near-term support. On the upside, key short-term resistance and the bull trigger has been defined at 4206.00, the Jan 18 high. S&P E-Minis traded lower again Thursday. A key short-term resistance has been defined at 4035.25, the Jan 17 high and price has traded through support at 3930.77, the 50-day EMA. A clear break would highlight a potential bearish reversal and expose 3891.50, the Jan 10 low. On the upside, the contract needs to clear 4035.25 to cancel any developing bearish threat and confirm a resumption of recent bullish activity.

• Japan's NIKKEI closed higher by 148.3 pts or +0.56% at 26553.53 and the TOPIX ended 11.25 pts higher or +0.59% at 1926.87.
• Elsewhere, in China the SHANGHAI closed higher by 24.535 pts or +0.76% at 3264.814 and the HANG SENG ended 393.67 pts higher or +1.82% at 22044.65.
• Across Europe, Germany's DAX trades higher by 72.58 pts or +0.49% at 14974.09, FTSE 100 higher by 36.8 pts or +0.48% at 7777.08, CAC 40 up 38.13 pts or +0.55% at 6977.99 and Euro Stoxx 50 up 21.28 pts or +0.52% at 4109.41.
• Dow Jones mini up 60 pts or +0.18% at 33197, S&P 500 mini up 9.25 pts or +0.24% at 3924.25, NASDAQ mini up 42.75 pts or +0.38% at 11398.25.

COMMODITIES: Trend Conditions in Gold Bullish After Trading to Fresh Cycle High Thursday

WTI futures traded higher Wednesday but price pulled back from the $82.38 session high. This highlights a potential bearish threat. Attention is on support at $77.75, the 20-day EMA. A break of this average would highlight a stronger bear threat and expose support at $72.46, the Jan 5 low. On the upside, key short-term resistance has been defined at $82.38 where a break would reinstate the recent bullish theme. Trend conditions in Gold remain bullish and the yellow metal traded to a fresh cycle high on Thursday. This confirms an extension on the uptrend and maintains the price sequence of higher highs and higher lows. Note that moving average studies are in a bull mode position - reflecting the uptrend. The focus is on $1963.0 next, a Fibonacci retracement. Support to watch lies at $1867.4, the 20-day EMA. Short-term pullbacks are considered corrective.

• WTI Crude up $0.74 or +0.92% at $81.07
• Natural Gas down $0.08 or -2.56% at $3.18
• Gold spot down $3.6 or -0.19% at $1929.57
• Copper up $1.3 or +0.31% at $424.75
• Silver up $0.07 or +0.31% at $23.9487
• Platinum up $1.13 or +0.11% at $1037.75