Year gets minutes rattle!
It has only been two trading days, but the double-digit, two-month rally to close 2023 has not yet carried over into the new year.
Shall we take this bumpy start to 2024 as a signal that much more trouble is ahead this year? Or is this simply a "breather" – and par for the course after a 15% rip higher in S&P 500 from late Oct through late Dec - an annual gain of 24% in 2023?
Coincidentally, this risk rally was associated with spike in the reverse repo facility from $680 billion to over $1 trillion in just a few weeks. It is now back down to $700 billion- so the rally is petering out. At the end of it, it’s not Fed, Powell but the good old factor -Liquidity?
Every perceivable positive has already been priced and hence it’s going to Less exciting year for risk - may be entering a more boring era where it's neither too hot nor too cold.
FOMC minutes -at times- are 'laundered' in the sense that any post FOMC meeting cleanse/messaging Fed wants to send, they use the minutes release as a way to do so- another such FOMC minutes.
Look at the Labour market which appears no longer in its gangbusters state JOLTS show steady job postings, cooler hiring & less quitting: After a record-shattering stretch, labour market has settled into a normal groove. (US Atlanta Fed GDPNow cast Q4: 2.51% - prev 2.03%)
German Unemployment steady at 5.9% - once again confirming that this recession is unique one where unemployment won’t go up dramatically - next important data is EZ inflation on Friday. Close below 21 dma1.0945 shows end of up-trend. Support now at 61.8 of the Dec rise at 1.0882. To consolidate within this range before next directional move - mostly towards 1.0700 unfolds.
PBoC has worked to sustain the value of yuan in 2023 lest its fall provokes a capital flight. No respite from this exchange rate regime in 2024 as well - reflects policy changes. - sidelining of PBoC is a move from more market-oriented policies towards direct control from govt. In data front, some good news - China's Services PMI 52.9 in Dec.
EUR/GBP fell with yield spreads, 10yr gilt +2bp 3.669%, 10yr bund -6bp 2.000.
Likely to stay in broad 1.2600 - 1.2825 range for now.
Ueda says Japan's economy can balance rises in wages and inflation. USD/JPY to trade firm on course to 144.58 - 161.8% off last week's trend low base.