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Switzerland
Switzerland’s November CPI is predicted to be +1.5 percent, up from +1.4 percent year on year.
The latest figures from the Federal Statistics Office today reveal a minor increase in Swiss inflation pressures. But with the core reading being mostly contained, it is unlikely to move the SNB.
Swiss inflation is estimated to creep a little higher but still keep well below 2%. As a result, there aren’t many overshooting price worries for the SNB as compared to the rest of the world for now.
As much as manufacturing output held up in November, overall conditions are still largely hampered by supply chain disruptions for the most part. Surging cost pressures will only add to worries about the outlook. Renewed COVID-19 concerns certainly won’t help to calm the mood heading into year-end.
Manufacturing output saw a light bounce in November. So the final reading today may reaffirm that but also underscore problems related to supply bottlenecks. It is something of a mainstay in the region. And will likely persist further in the coming months, adding to surging price pressures.
Europe
Eurostoxx futures are up 0.9% in early European trade.
The market is breathing a sigh of relief. The Fed Chair Powell’s aggressive stance on the omicron variant helps to alleviate broader anxieties, albeit rate hikes are still not exactly reassuring for stocks, as witnessed yesterday.
Economic data is due in the European session. Fed Chair Powell threw the market another curveball yesterday. He was calling for the end of the ‘transitory’ inflation narrative, clearing the door for a faster rate of reduction.
Markets had been pricing in Fed rate rises for the middle of the year because of omicron worries. However, Powell’s statements have caused a rethink.
The science underlying the omicron version isn’t completely understood yet. Also the uncertainty is putting markets on edge. But so far, the evidence isn’t pointing to anything too severe. And Powell’s perspective implies that the US will not take a step back.
The dollar rocketed higher only to give up most of its gains following Powell’s speech. Along with the Aussie and kiwi maintaining daily closes above key technical support levels before rebounding further today as risk trades fared better.
Oil was a significant loser yesterday. But it is now up more than 2% to $67.80 as buyers search for bargains. Take note of Goldman Sachs’ position on oil.
Looking ahead, risk sentiment will continue to be a significant driver of trade mood. However, keep an eye out for dollar plays after Powell’s surprise yesterday.
Despite the expiration of the stamp duty holiday in September and the steady increase in prices. UK home price rise is projected to continue till the year’s end. It indicates solid demand conditions.
After a hiccup in September, German retail sales are expected to rise marginally in October, but rising cost pressures will make it difficult in the coming months as price increases are passed on to consumers.
Risk remains bullish ahead of European trading.
Powell’s words yesterday caused a significant shift in market sentiment. He dismissed the hazards of the new COVID-19 variation while focusing on monetary policy.
Powell asked for the ‘transitory’ inflation story to be abandoned. He also argued for a faster rate of reduction, urging investors to pay attention when the Fed speaks.
Stocks have continued to suffer as a result of rate rise worries. But US futures are showing good appetite so far today, with the S&P 500 futures up 1%.
While other risk trades remained exposed late yesterday. Things did not go as terribly as they should have. Laying the groundwork for a minor rebound today.
Despite touching a low of 112.53 before Powell intervened, the USD/JPY managed to avoid a daily close below the 9 November low. And the price is already back up to 113.57. This is along with Treasury rates also creeping higher so far on the day.
In other news, oil has recovered from a drop below $65 yesterday to be up 3% today. It is trading just around $68 as we head into the day.
All in all, risk trades are looking like they are finding some base on the week as bargain hunters appear to be sweeping in after Powell helped to calm the mood a little.
Omicron headlines will continue to do the rounds in the days/weeks ahead, so just be wary of that. Ultimately, we will have to go where the data takes us.
But for now, the talking heads are the ones dictating sentiment and it is hard to find any more influential one than Powell.