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.

Following UK inflation data (released just ahead of the European cash open) easing on both the headline and core level for year-on-year metrics on Wednesday, which increased rate cut pricing for the BoE, as well as for the Fed and the ECB, the economic calendar diverted attention stateside.

US consumers were a happy bunch in December. Consumer confidence data, according to the US Conference Board, jumped to 110.7 in December (up from a revised value of 101.00 in November). This marks the highest value since early 2021 and was within striking distance of the upper estimate range high of 111.6. The combination of slowing inflationary pressures and news of the possible Fed pivot, in addition to lower mortgage rates, is shown in yesterday’s numbers. The release also added that the Present Situation Index advanced to 148.5 from 136.5 in November; the Expectations Index also jumped to 85.6 in December, up from its downwardly revised reading of 77.4 in November.

The Day Ahead

Looking forward, 1:30 pm GMT today draws attention to retail sales numbers out of Canada, US GDP data, US weekly unemployment claims and the Philadelphia Fed manufacturing index.

The release of the US GDP will mark the final estimate for Q3 and is expected to show economic activity increased by 5.2% in the quarter. You may recall that economic activity in Q2 rose 2.1%. Regarding weekly unemployment claims for the week ending 16 December, the median estimate suggests filings jumped to 215,000, up from 202,000 (the estimate range is between 230,000 and 206,000). The US Philadelphia Fed manufacturing index is also expected to improve to -3.0, up from November’s reading of -5.9 (the estimate range is between 3.6 and -8.0). As a note, beyond 0.0 suggests improving conditions in the region, while sub 0.0 indicates worsening conditions.

Markets

The dollar, according to the US Dollar Index, finished Wednesday moderately higher, though it remained within the prior day’s range. Technicians may acknowledge that the lacklustre price action of late has seen price shape what appears to be a bearish pennant formation; a breakout to the downside, therefore, could encourage further underperformance in the US dollar and may see bids challenged at daily support between 101.44 and 101.77.

Also in the FX space, the British pound (GBP) underperformed in G10, following softer-than-expected inflation numbers, which, as noted above, increased rate cut pricing for the BoE, according to Bloomberg’s WIRP function.

Dollar Index Daily Chart:

(Trading View)

Stocks sold off on Wednesday amid a spike in volatility during US trading; there was underperformance across all eleven sectors, with consumer staples stocks and utility stocks serving as notable laggards on the session, down -2.0%. The Dow Jones Industrial Average fell 475 points (-1.3%) to 37,082, halting a nine-session rally. The S&P 500 dropped 70.02 points (-1.5%) to 4,698, and the Nasdaq 100 slid 257.7 points (-1.5%) to 16,554.

In the commodities space, spot gold (XAU/USD) remained largely lacklustre and spent the session fluctuating within prior ranges. Oil prices, however, saw WTI oil spike northbound and touch gloves with channel resistance extended from the high of $94.99. You may recall that yesterday’s post highlighted the following: ‘Given price failed to test the lower boundary last week, this suggests buyers are gaining in confidence and could attempt to overthrow the channel resistance soon and target daily resistance found at $79.19’.

Bitcoin was once again in the headlines on the back of Blackrock, NASDAQ, and the SEC, conducting their second meeting this month to discuss a potentially game-changing Spot Bitcoin Exchange-Traded Fund (ETF). The FP Markets Research Team recently released a post on the major cryptocurrency here.

G10 FX space as of 08:25 am GMT:

(Trading View)

Thanks for reading. Have a great day.

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