The FP Markets Research Team produces First Light News during the early hours of the European session, a daily Market Briefing that helps ensure traders and investors are up to date in the macro space for the day ahead.
Good morning.
It was a quiet one for the macro space on Monday.
Earlier this morning, however, employment and wage data for the UK were in the spotlight.
The unemployment rate remained unchanged at 4.2% in the three months to September, defying the median market estimate of 4.3%. Pay excluding bonuses was as expected at 7.7% in September, down from 7.8% in August. Pay including bonuses, nevertheless, came in higher than expected at 7.9%, though lower than August’s reading of 8.1%. Today marks the lowest reading in four months and will be welcomed news at the Bank of England (BoE) as, although still hot, signs of a loosening labour market are evident.
(Office for National Statistics [ONS])
From the market’s perspective, the above-noted data has changed little. Market pricing shows a 20% chance that the BoE will hike, with a 25bp rate cut still priced in for around August next year. Sterling rose against its US counterpart following this morning’s economic data, drawing the GBP/USD exchange rate to a high just north of $1.23.
US Inflation Numbers Eyed Later Today
Today is all about US inflation data.
According to Bloomberg, the median estimate is 3.3% for year-on-year (YoY) headline inflation, with a reasonably tight estimate range between 3.4% and 3.2% (and an average estimate of 3.31%). For the core measure for the same period, the median estimate is 4.1%, accompanied by an estimate range between 4.2% and 3.7% (and an average estimate of 4.1%). From September to October, headline inflation is expected to cool to 0.1%, and the core measure for the same period is anticipated to remain unchanged at 0.3%.
(YoY Bloomberg Estimates [Distribution Curve])
You will recall YoY inflation was unchanged at 3.7% in the twelve months to September, and the core measure for the same period eased to 4.1%, down from 4.3% in August.
Today’s inflation data will be important; any marked deviation to the upside would likely underpin the dollar and could see markets reprice rate expectations (a slower-than-expected print, on the other hand, could weigh on the buck). Current market pricing implies that the Fed is done and dusted with rate hikes, and rate cuts could come as early as mid-2024.
Interesting Charts
WTI oil is an interesting market at the moment. Technically bolstered by monthly support and daily confluence—see here for a complete analysis—the unit made its way north of the 200-day simple moving average at $78.15 yesterday, meaning further outperformance could be seen until daily resistance at $81.69.
WTI Oil Monthly and Daily Charts:
G10 FX space as of 08:50 am GMT:
Thanks for reading. Have a great day.
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