Mohicans markets：MHM Today News

☆ At 23:00, the United States will announce the one-year inflation rate expectation in January. After the slowing CPI data, the market expects the inflation expectation to fall further to 4.30%. In addition, the initial value of the University of Michigan consumer confidence index in January will also be announced at this time, and the market is expected to record 60.5, up from the previous value of 59.7.

☆ At 23:20, in 2023, the FOMC Voting Committee and Chairman of the Philadelphia Federal Reserve Huck delivered a speech on the economic outlook of the Greater Philadelphia Chamber of Commerce and participated in the discussion on economic trends. Investors can pay attention to his speech. He said on Thursday that it was time to adjust the future interest rate increase to 25 basis points.

Market Overview

Review of trend of the global market

On Thursday, stimulated by the slowly cooling CPI data, the spot gold plummeted nearly $14 in the short term, and then rebounded rapidly, breaking the 1900 barrier for the first time since May last year. In addition, the price of gold fell again during the speech of the Chairman of the Federal Reserve of Philadelphia, Huck, and fell below $1890/ounce for a time, then recovered, and finally closed up 1.14% at $1896.86/ounce. Spot silver fell first and then rose with gold, and once stood above the $24 threshold, and finally closed up 1.58% at $23.78/ounce. 

The US dollar index plunged sharply, breaking the 103 mark, narrowly holding the 102 mark, and finally closing down 0.97% at 102.25. In addition, the cumulative decline of the US dollar from the current round's high expanded to 1200 points or 10.8%. The yield of 10-year US Treasuries fell to a recent low of 3.444%. The upside down margin of the yield curve of the US two-year and 10-year treasury bonds was once extended to 71.70 basis points.

 In terms of crude oil, WTI crude oil once rose to around $79, and finally closed up 0.7% at $78.22/barrel; Brent crude oil closed up 1.09% at US $83.79 per barrel.

On the US stock market, although inflation has slowed down, the US stock market is still tepid. The Dow rose 0.64%, the Nasdaq rose 0.64%, and the S&P 500 index rose 0.34%. The three major stock indexes dived and turned green at the beginning of the session. China shares were mixed, with the Golden Dragon Index up 0.14%, Alibaba and Bilibili closing down about 1%. Pinduoduo and JD.com closed slightly higher, with the daily premium and fresh revenue rising by more than 5%.

European stocks closed higher, with Germany's DAX30 index rising 0.74% to 15058.3; The FTSE 100 index rose 0.89% to 7794.04; The European Stoxx 50 Index closed 0.66% higher at 4126.68.

Market Focus

1. The U.S. CPI registered its first negative year-over-year growth in 32 months to -0.1% in December, with an annual rate of 6.5%, down for the sixth consecutive month, and an annual rate of core CPI of 5.7%. Biden commented: Inflation has declined, giving people breathing room.

2. The swap market is currently expecting a Fed rate hike: the probability of a 25BP hike in February is over 90%, reaching a terminal rate of 4.91% in June, with room for a 50BP rate cut by the end of the year.

3. Chairman of the U.S. White House Council of Economic Advisers: the possibility of further release of strategic oil reserves is not ruled out.

4. ECB Economic Bulletin: Eurozone economy may contract in Q4 2022 and Q1 2023.

5. The North Sea's largest oil field Johan Sverdrup on Wednesday due to power outages resulting in about 500,000 barrels per day of oil production cut.

6. Iraqi judiciary issued an arrest warrant for then-US President Donald Trump who ordered the attack on Iranian senior general Suleimani on June 6.

7. U.S. inflation data caused a huge shock to financial markets, with U.S. bonds fluctuating 22BP in the short term at 2Y, gold breaking the 1900 mark, and the dollar extending its cumulative decline to 1200 points or 10.8% from the current high. The yen appreciated sharply by 2.5% in a single day, bitcoin made a breakthrough after two months of sideways trading, and U.S. stocks were weakly boosted.

8. Fed officials speak - Harker: It's time to adjust the interest rate range to 25BP. The terminal rate is expected to be slightly above the 5% level; Barkin: tend to slow down the rate hike, tend to balance sheet consists entirely of treasury bonds; Bullard: delay makes no sense, should quickly raise the rate above 5%. Core inflation is falling more slowly.

Geopolitical Situation

Conflict Situation：

1. The Belarusian Defense Ministry issued a bulletin on November 11 saying that the air defense missile system of the joint Russian-Belarusian regional forces began to enter combat duty.

2. Local forces in Donetsk said in a news release on December 12 that Russian forces have taken control of the western part of Soledad. The Ukrainian side said that the fighting on the ground continues.

3. The State Electricity Company of Ukraine issued a news release on the 12th that electricity restrictions were imposed throughout Ukraine.

4. Zelensky: Ukrainian troops are holding their positions in the city of Soledad and inflicting heavy losses on the enemy.

5. Belarusian Defense Ministry: Russian Defense Ministry officials visited Belarus and checked the combat readiness of troops.

6. Russian Defense Ministry: Russian offensive in Donetsk region of Ukraine continues to be successful. Sporadic resistance activity by the Ukrainian forces remains in the Sultanate region.

Institutional Perspective 

01

Goldman Sachs

The dollar is still the world's major currency, and other currencies like the euro, the British pound and the Chinese yuan have so far failed to take its place, putting the dollar on track for a new rally.

02

SOCIETE GENERALE

High interest rates are likely to support the euro throughout the year.

Kit Juckes, chief global foreign exchange strategist at Societe Generale, believes that the euro should be bought low unless there are new developments in the geopolitical situation. If not for the Russian-Ukrainian conflict affecting inflation and economic growth, public finances and terms of trade in Europe, the euro should now be trending significantly higher against the dollar, approaching the 1.20 level. Of course, the direct impact of the conflict on the economy and the exposure of the negative impact of the European energy crisis on confidence are important. However, if the impact of the conflict does not intensify or disappear altogether, our interest rate forecasts warrant another four-digit rise in EURUSD this year, which is consistent with our forecast for EURUSD to end the year at 1.12.

03

MUFG

U.S. CPI data would need to surprise sharply to the upside to support the dollar and change market expectations.

Mitsubishi UFJ economists said they expect tonight's U.S. CPI data to provide further confirmation that inflationary pressures are continuing to ease, with headline inflation expected to fall by 0.1% on a monthly basis and core inflation to register a modest 0.3% increase. Prior to the release of the U.S. CPI data, the market is biased towards believing that the Fed will further slow the pace of rate hikes to 25 basis points at its next meeting and that the terminal rate will remain below 5%. Only a sharp upside surprise in today's data could materially alter these expectations and prevent the dollar from continuing its downward correction.