Daily Market Brief 22-11-22

EUR/USD looks to EZ consumer confidence & Fed speakers – Daily Market Brief, November 22, 2022

EUR/USD struggles to recover above 1.0250 as ECB speakers support a smaller rate hike in December. Looking ahead, Eurozone consumer confidence and Fed speakers could influence the pair.

·         Eurozone consumer confidence to tick higher again in November

·         Gold snaps a 4-day losing streak with Fed speakers in focus

·         Oil rebounds as Saudi Arabia denies oil output increase rumours; China COVID concerns remain

Reports of rising COVID cases in China and tighter zero-COVID restrictions fueled a broad risk off-market mood on Monday. Stocks in Europe and on Wall Street ended the day in the red, while the safe-haven USD was a clear winner.

Today the market mood is mixed. While China’s rising COVID numbers remain a concern, Fed speak also dictates the market mood. Federal Reserve officials have been clear that they remain committed to bringing down inflation. However, more speakers are acknowledging that the time to slow the pace of hikes could be approaching.

San Francisco Fed Chair Mary Daly warned that the central bank must be mindful of the lag time between policy action and the impact on the real economy. Cleveland Fed President Loretta Mester also said she was open to a slower pace of hikes.

The DAX is set to open 0.1% lower, while the CAC and the FTSE point to modest gains on the opening bell.

Eurozone consumer confidence

The Eurozone economic calendar is relatively light, with consumer sentiment figures expected to draw the most attention. Eurozone consumer confidence is expected to rise again in November to -26, up from -27.6 in October and as it continues its recovery from September’s all-time low. While morale is slowly improving, record-high inflation and rising interest rates mean households remain concerned about their finances.

After 0.8% losses yesterday, EUR/USD’s rebound is struggling at 1.0250 even as less hawkish commentary from Fed speakers weighs on the USD. ECB policymakers also suggest that the need for smaller rate hikes is approaching. ECB chief economist Philip Lane made a case for a 50 basis point hike at the December meeting. His comments came after the German PPI tumbled to 34.5% YoY in October, down from 45.8%.

Fed speakers

Looking ahead, the US economic calendar is light. The focus will be firmly on Fed speakers, with investors watching closely for further clues as to where Fed sees the path of rate hikes heading. Gold prices are rising after four days of declines as the pause in the USD helps the precious metal recovery. Less hawkish Fed commentary could help Gold recapture $1750.

Oil

Oil prices experienced high levels of volatility. Oil trades under pressure on rising demand concerns as China tightened COVID restrictions before plunging 4% at its lowest point on a WSJ report that OPEC+ was planning to raise output by 500k barrels per day in December. This seemed a little strange, given that the oil cartel cut production by 2 million barrels a day in November. Saudi Arabia’s energy minister denied the reports, sparking a recovery in the price of oil. However, the price has failed to recover back above $80.00, and gains could remain capped as nerves over China’s COVID cases remain high. API stockpile data is due later.

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