NEWS
MNI FED PREVIEW - SEPTEMBER 2023: The Last Mile
The FOMC will hold rates at its September meeting, while maintaining its tightening bias. Despite recent progress on inflation, which will see core PCE forecasts revised down for the first time since 2020, we expect most of the FOMC’s median expectations to be largely unchanged in the latest set of quarterly projections. That includes the median rate “dots” indicating one further hike by end-2023, as most participants will remain cautious of signalling that the hiking cycle is over, and 100bp of cuts in 2024.
US (BBG): McCarthy Demands 8% Spending Cut, Border Wall to Avert Shutdown
House Speaker Kevin McCarthy proposed a deal to temporarily avert a US government shutdown, with demands including an 8% spending cut for domestic agencies and a resumption of border wall construction. McCarthy presented the plan to Republican lawmakers in a conference call Sunday evening after negotiators representing key factions within the House GOP settled on the demands to temporarily fund the government for 31 days. A House vote on the measure is planned for Thursday.
US/CHINA (BBG): US, Chinese Officials Meet in Malta to Keep Channels Open
US National Security Adviser Jake Sullivan and Chinese Foreign Minister Wang Yi discussed a possible meeting of their leaders and communication channels between the world’s biggest economies during two days of talks that ended Sunday. While the meeting in Malta came at a critical time in US-China relations, Wang is scheduled to visit Moscow for talks with Russian Foreign Minister Sergei Lavrov this week.
US/IRAN (MNI): US-Iran Prisoner Swap to Take Place Today
Iran's Foreign Ministry has confirmed that Iran and the US will today complete a prisoner swap as part of a negotiated deal to unlock USD$6b in frozen Iranian oil revenue. Iran's MFA reports that five Iranian prisoners and five US prisoners will be swapped and Iranian funds frozen in the Republic of Korea will be, "in Iran's possession today." Although the White House has stressed that the funds are Iranian, and are only to be unfrozen for humanitarian applications, striking any deal with Iran which includes the transfer of money, is likely to attract criticism in the US.
ECB (BBG): ECB’s Kazimir Hopes Last Week’s Interest-Rate Hike Was the Last
European Central Bank Governing Council member Peter Kazimir said September’s interest-rate increase may be the final one in this cycle, though he “can’t rule out the possibility” of others. Officials must continue to evaluate inflation and economic-growth data over the coming months, the Slovak central bank chief said Monday in a statement. Only the ECB’s March forecasts can confirm that inflation is heading “unequivocally and steadily” toward the 2% goal, he said.
ECB (BBG): ECB’s Holzmann Says Latest Interest Rate Hike Might Not Be Last
Stubborn euro-area inflation could force the European Central Bank to raise interest rates again, according to Governing Council member Robert Holzmann. The Austrian policymaker defended the decision to lift the deposit rate for a 10th straight time this week and said the conclusion that the current level of borrowing costs will substantially advance the fight against price rises shouldn’t be understood as the ECB going soft.
ECB (BBG): ECB May Hit 2% Goal Sooner Than Forecast, Says Portugal’s Raposo
The European Central Bank may see inflation returning to its 2% target sooner than currently forecast, considering the fragile state of the economy, according to Clara Raposo, vice governor of the Bank of Portugal. While Raposo said she’s “not pessimistic” about the outlook, she expressed concern that dwindling export demand could further weigh on an economy already struggling to grow.
ECB (BBG): ECB’s Muller Sees ‘Strong’ Case to Quicken Balance-Sheet Rolloff
The European Central Bank should consider speeding up the wind-down of its bond portfolio now that interest rates have reached a level that’s probably high enough to get inflation under control, Governing Council member Madis Muller said. One option would be to start rolling off the €1.7 trillion ($1.8 trillion) of securities amassed during the pandemic under the so-called PEPP program, where proceeds are currently scheduled to be fully reinvested through the end of 2024, the Estonian central-bank governor said in an interview.
ECB (BBG): ECB’s Stournaras Urges Governments to Help Bring Down Inflation‘
European Central Bank Governing Council member Yannis Stournaras said governments must do their part in reining in consumer prices after borrowing costs reached a level that may well be their peak. “Monetary policy has done its part to fight inflation,” Stournaras said in an interview in Santiago de Compostela, Spain, where he attended a meeting of euro-area finance officials. “Now it’s up to fiscal policy to take out some of the heat.”
ITALY (MNI): Italy NPL Plans Stray from Norm-Bank Supervisor
Italy’s plans to change rules on non-performing loans risk undermining the drive for harmonised rules across the eurozone, a senior banking supervisor told MNI, pointing also to the danger that government attempts to impose taxes on banking profits could erode financial sector incentives and stability as the economy slows.
JAPAN (BBG): Japan Voters Unhappy With PM’s Price Policies, Poll Shows
More than three quarters of Japanese voters are unhappy with Prime Minister Fumio Kishida’s handling of price rises, according to a poll carried out by the Asahi newspaper. About 77% of respondents to the survey carried out Sept. 16-17 said they didn’t rate his price policies positively, compared with 17% who said they did. The findings came in a poll that showed that overall support for Kishida’s cabinet had crept up by four percentage points to 37% following last week’s cabinet reshuffle.
NEW ZEALAND (MNI): Polls Show Likely Nationals Win, Inflation Main Voter Concern
With less than a month to go until elections, RNZ's poll of polls shows the incumbent Labour Party well behind the opposition National Party. Polls are generally suggesting that NZ will see a change of government. The latest reading for the polls of polls is showing that support for the Nationals is growing and is now up to 38.3% from 37.6% while its likely ally ACT fell 1pp to 11.5%. But together this would imply 65 seats, a majority.
FOREX: USD Leans in the Red.
- The Dollar has pared some of its overnight losses, but still leans mostly in the across most g10s.
- NZD is the best performer, albeit by just 0.19%.
- This morning saw some notable moves in the NOK, but local desks have reported very little in terms of driver despite Oil being higher as the NOK fell.
- Oil has since pulled back, and the currency is still under broader pressure, making new lows against the EUR, USD, SEK.
- USDNOK has now cleared the 10.8299/10.8418 area, the July high and 28th June high.
- Not much in term of resistance at current level, with the next target now at 10.9133, the 23rd June spike.
- EURNOK sees 11.6301, August high and highest since the start of June.
- Most G10s pair/crosses trade in tight ranges ahead of a busy week.
- Looking ahead, there's no data nor risk events to start the week, with the main focus on UK CPI the Fed and PMIs on Friday, as well as plenty of other Central Banks decisions.
BONDS: Outrights Cheapen, GGBs Widen
Early weakness in benchmark European & UK bond futures failed to provide meaningful breaks below round number support (130.00 for Bunds & 95.00 for gilts), before a tick away from cheaps.
- Weekend comments from various ECB Governing Council members pushed back against the idea of near-dated rate cuts, while some more hawkish comments (Holzmann & Kazimir) stressed that we may not have reached terminal rate levels.
- Impetus from the back end of last week and another ’23 high for crude oil futures (although they are off best levels, last trading around flat) were eyed initially.
- German cash benchmarks run 0.5-1.5bp cheaper, Bund futures -15.
- GGBs widening noted in 10s. Moody’s two-notch rating upgrade of Greece to one step below IG (in line with Fitch & S&P) was probably the best that the country could have hoped for in one step. Still, the ‘stable’ outlook will have disappointed participants and is aiding the widening.
- Gilt benchmarks are 1.5-3.5bp cheaper across the curve, futures -30.
- UK headline flow has focused on familiar areas, with participants eying this week’s domestic CPI data and BoE monetary policy decision (~21bp of tightening priced, ~39bp of cumulative tightening priced for current cycle).
- Gilts widen vs. Bunds across the curve.
EQUITIES: Friday's Sell-Off Reinforces Bearish Theme in E-Mini S&P
Eurostoxx 50 futures traded sharply higher last Thursday and the contract remains closer to its recent highs. Last week’s gains threaten the recent bearish theme and signal a possible short-term reversal with a key support defined at 4210.00, the Sep 8 low. A continuation higher would expose resistance at 4388.00, the Aug 30 high where a break would strengthen a bullish case. For bears, a break of 4210.00, resumes the recent downtrend. A bear cycle in the E-mini S&P contract remains in play. Friday’s strong sell-off reinforces this theme and suggests the recent shallow correction higher is over. Key short-term support has been defined at 4483.25, the Sep 7 low. Clearance of this level would be seen as a bearish development and open 4397.75, the Aug 18 low and a bear trigger. For bulls, a resumption of gains would instead open 4597.50, the Sep 1 high.
- In China the SHANGHAI closed higher by 8.189 pts or +0.26% at 3125.932 and the HANG SENG ended 252.34 pts lower or -1.39% at 17930.55.
- Across Europe, Germany's DAX trades lower by 74.91 pts or -0.47% at 15817.37, FTSE 100 lower by 3.34 pts or -0.04% at 7707.85, CAC 40 down 59.38 pts or -0.8% at 7319.44 and Euro Stoxx 50 down 23.33 pts or -0.54% at 4271.72.
- Dow Jones mini up 51 pts or +0.15% at 34978, S&P 500 mini up 7.75 pts or +0.17% at 4505.75, NASDAQ mini up 32.5 pts or +0.21% at 15424.75.
COMMODITIES: Gold Continues Recovery from Last Week's Lows
The uptrend in WTI futures remains intact and the contract is trading higher today. Last week’s gains confirm a resumption of the uptrend and maintain the bullish price sequence of higher highs and higher lows. Note too that moving average studies are in a bull-mode position, highlighting a rising trend. The $90.00 handle has been cleared, this opens $92.17 next, the Nov 8 2022 high (cont). Initial firm support to watch is $85.46, the 20-day EMA. Gold has recovered from last week’s $1901.1 low on Sep 14. A break of this level would strengthen a bearish theme and highlight the fact that the recovery between Aug 21 - Sep 1 has been a correction. This would expose $1884.9, Aug 21 low. On the upside, initial firm resistance is seen at $1927.9, the 50-day EMA. The average has been pierced, a cleared break would be a bullish development and open key resistance at $1953.0, the Sep 1 high.
- WTI Crude up $0.38 or +0.42% at $91.17
- Natural Gas up $0.02 or +0.76% at $2.664
- Gold spot up $1.78 or +0.09% at $1925.59
- Copper up $0.35 or +0.09% at $380.45
- Silver up $0.07 or +0.3% at $23.1041
- Platinum up $3.47 or +0.37% at $933.36
| Date | GMT/Local | Impact | Flag | Country | Event |
| 18/09/2023 | 1215/0815 | ** |  | CA | CMHC Housing Starts |
| 18/09/2023 | 1230/0830 | * | | CA | Industrial Product and Raw Material Price Index |
| 18/09/2023 | 1400/1000 | ** |  | US | NAHB Home Builder Index |
| 18/09/2023 | 1530/1130 | * | | US | US Treasury Auction Result for 26 Week Bill |
| 18/09/2023 | 1530/1130 | * | | US | US Treasury Auction Result for 13 Week Bill |
| 18/09/2023 | 2000/1600 | ** | | US | TICS |
| 19/09/2023 | 0800/1000 | ** |  | EU | EZ Current Account |
| 19/09/2023 | 0900/1100 | *** | | EU | HICP (f) |
| 19/09/2023 | 0900/1000 | ** |  | UK | Gilt Outright Auction Result |
| 19/09/2023 | 1230/0830 | *** | | CA | CPI |
| 19/09/2023 | 1230/0830 | *** | | US | Housing Starts |
| 19/09/2023 | 1230/1430 | | EU | ECB's Elderson Speaks at Banking Union Conference | |
| 19/09/2023 | 1255/0855 | ** | | US | Redbook Retail Sales Index |
| 19/09/2023 | 1530/1130 | * | | US | US Treasury Auction Result for Cash Management Bill |
| 19/09/2023 | 1700/1300 | ** | | US | US Treasury Auction Result for 20 Year Bond |
| 19/09/2023 | 1745/1345 | | CA | BOC Deputy Kozicki speech in Regina SK. |