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Mixed price action this week as traders balanced between catalysts from China, a slew of disappointing economic updates, and lots of central bank commentary. The Japanese yen seemed to be the biggest beneficiary, while the Loonie saw red despite a bounce in oil prices.

Notable News & Economic Updates:

Protesters flooded the streets in China, showing anger at zer0-COVID policies; Chinese authorities announced a stepped up focus on vaccinating older people

J.P.Morgan Global Manufacturing PMI for November: 48.8 vs. 49.4 in October

Chinese official manufacturing PMI down from 49.2 to 48.0 in Nov; non-manufacturing PMI fell from 48.7 to 46.7 vs. 48.0 forecast

On Wednesday, Fed Chair Jerome Powell hinted that the pace of interest rate hikes may moderate as early as the upcoming December Fed meeting

China Caixin manufacturing PMI improved from 49.2 to 49.4 in November and marked its fourth contractionary reading in a row

Eurozone manufacturing PMI survey showed continued deteriorating conditions in November, but slight improvement over October

At a conference in Bangkok (organized by the BIS and Bank of Thailand), several central bank governors, including ECB President Christine Lagarde, warned that inflation will remain volatile due to risks in supply chains, climate change, and geopolitics

U.S. manufacturing survey data showed contractionary conditions for the first time since early 2020, after the start of the COVID pandemic

U.S. Non-Farm Payrolls came in hotter-than-expected at 263K vs. 200K forecast, arguably keeping the Fed in tight monetary policy mode.

Intermarket Weekly Recap

Dollar, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay 1-Hour

Dollar, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay 1-Hour

Traders had a lot to play with this week, starting with headlines from China that had volatility going right from the Monday jump. It started with news of mass protests in China against the zero-Covid policies that took risk sentiment negative during Asia trade, especially hitting oil prices in the process.

Sentiment seemed to have shifted on Tuesday, though, correlating with rumors that China would announce an end to its ‘zero’ policy at an upcoming press conference.  That didn’t turn out to be the case, but the announcement of focus on vaccinating the elderly seems to have been enough to keep the positive sentiment flowing on the session.

On Wednesday, the focus shifted to an anticipated speech from Fed Chair Jerome Powell, which did turn out to be a market mover as the Fed Chair commented on the possibility of moderating the pace of tightening as soon as this month. He did also re-iterate that the country has a long way to go before it saw price stability, but the markets seemed to only focus on the former point as it pushed equities, crypto higher against a rout in the U.S. dollar and bond yields.

On Thursday, volatility picked up once again likely due to traders being hit with not only the latest PMI data from Europe (signaling further contractionary conditions), but also the latest core PCE Index read from the U.S. The PCE Index (the Fed’s preferred inflation measure) came in below the previous month and forecast, and was likely the catalyst for the fall in U.S. dollar/bond yields.

Curiously, risk assets didn’t pop as one would have expected, possibly due to other U.S. data pointing to a strong jobs market and higher wages, both of which support argument for the Fed to stay restrictive.

On Friday, it was all about the U.S. Non-Farm Payrolls number, arguably the most highly anticipated economic report besides inflation data, and boy, it did not disappoint with bringing some volatility. The number came much hotter-than-expected, not only with a 263k read in November but also October’s number being revised higher to +284K.

Traders seemed to have priced this as enough to keep the Fed hiking interest rates by at least 50 bps, evidenced by the dip in equities and pop in bond yields quickly after the release of the jobs report.

In the forex space, the Japanese yen took the top spot despite weaker-than-expected economic updates from Japan. It’s likely the yen benefited from risk-off flows, likely sparked by weakening global economic data and business survey reports, as well as commentary from central bankers that they will stay vigilant on inflation.

The biggest loser was the Canadian dollar, an unusual outcome given the rally in oil prices this week. It looks like the Loonie wasn’t able to jump in on the oil bounce starting on Tuesday, indicating that Loonie traders may have been more focused on the economic updates, including a tick lower in GDP from Canada on Tuesday.

USD Pairs

Overlay of USD Pairs: 1-Hour Forex Chart

Overlay of USD Pairs: 1-Hour Forex Chart

FOMC’s Bullard: Fed likely to keep rates above 5% into 2024 to tame inflation

In September, the S&P CoreLogic Case Shiller national house price index fell -0.8% m/m but still 10.4% y/y

U.S. job openings fell in October to 10.3M, with the ratio of openings to unemployed workers dipped to 1.7

U.S. Pending Home Sales Index for October: 77.1 vs. 80.8 in September; pending home sales were down 37% y/y

U.S. Q3 GDP growth was upwardly revised to +2.9% q/q from +2.6% q/q in Q3

U.S. job openings fell in October to 10.3M, with the ratio of openings to unemployed workers dipped to 1.7

ADP reported that private payrolls rose by 127K in November, far below October’s 239K gain

Fed’s Powell speech: “moderating the pace of rate increases may come as soon as the December meeting”; “we have a long way to go in restoring price stability”; the terminal rate likely to be “somewhat higher” than the 4.6% estimates in September

ISM Manufacturing PMI for November was 49.0 vs. 50.2 in October, the first contraction since May 2020

Weekly Initial U.S. jobless claims fell to 225K from 241K the previous week

U.S. Core PCE Index rose by +0.2% m/m in October and by +5.0% y/y; personal income rose by +0.7% m/m

U.S. employment change for November: +263K vs. +200K forecast; October revised higher to +284K; unemployment rate held at 3.7%; average hourly earnings was also hotter-than-expected at +0.6% m/m vs. +0.3% m/m forecast

GBP Pairs

Overlay of GBP Pairs: 1-Hour Forex Chart

Overlay of GBP Pairs: 1-Hour Forex Chart

Bank of England Governor Andrew Bailey claimed that because Treasury officials had not properly briefed them on the scope of the Chancellor’s plan, the institution was not prepared for the market’s shock response to Kwasi Kwarteng’s budget statement in September.

The U.K. government bond market, according to Bank of England Governor Andrew Bailey, is still struggling from recent shocks and is unable to handle a large-scale asset sale.

U.K. Mortgage Approvals for October: -10% m/m to 59K

Bank of England policy maker Catherine Mann said on Tuesday that inflation may reach 4.00%

U.K. BRC price shop index improved from 6.6% to 7.4% y/y in Nov

Bank of England chief economist Huw Pill said on Wednesday that he expects inflation rates in the U.K. will begin to fall in 2023

Nationwide: UK house prices post 1.4% drop in November, the biggest slide since mid-2020

EUR Pairs

Overlay of EUR Pairs: 1-Hour Forex Chart

Overlay of EUR Pairs: 1-Hour Forex Chart

According to Christine Lagarde, president of the European Central Bank, the inflation rate in the euro zone has not peaked and it could end up being higher than currently anticipated. This suggests that future interest rate increases are likely.

Klaas Knot, head of the Dutch central bank, hinted on Monday that the cycle of interest rate hikes intended to combat high inflation is far from over.

Annual growth rate of broad monetary aggregate M3 decreased to 5.1% in October 2022 from 6.3% in September

Preliminary Germany consumer price index in November: +10.0% y/y; -0.5% m/m

ECB Governing Council member de Cos said on Tuesday that it is not possible to anticipate how high interest rates need to go given the high level of uncertainty that exists.

Eurozone final consumer confidence read for November: -23.9 vs -23.9 preliminary read

Germany Unemployment Rate for November: 5.6% vs. 5.5% in October as the number of unemployed increased by 17K

Eurozone CPI for November was 10% y/y vs. 10.4% forecast & 10.6% y/y read in October

Germany’s retail sales plunge by 2% m/m in October vs. -0.6% expected, 0.9% previous

Eurozone Manufacturing PMI for November: 47.1 vs. 46.4 in October

In October 2022, industrial producer prices were down by -2.9% y/y in the euro area & -2.5% y/y in the EU

Germany Import Prices for October: -3.7% m/m and +20.9% y/y

CHF Pairs

Overlay of CHF Pairs: 1-Hour Forex Chart

Overlay of CHF Pairs: 1-Hour Forex Chart

Swiss National Bank Vice President Martin Schlegel sees a risk that the use of cash may fall into a “downward spiral”

Swiss GDP grew by +0.2% q/q in Q3 2022 vs. +0.1% q/q in Q2

KOF Economic Barometer for November: 89.46 vs. 90.86 in October

Swiss inflation remained at a 3% y/y growth in November; core inflation growth rate of +1.9% y/y

Swiss Retail Sales for October: -2.5% y/y vs. 2.6% y/y in September; -2.7% m/m excluding service stations

CAD Pairs

Overlay of CAD Pairs: 1-Hour Forex Chart

Overlay of CAD Pairs: 1-Hour Forex Chart

Canada GDP grew by 0.7% q/q in Q3 2022

Canada Manufacturing PMI for November: 49.6 vs. 48.8 in October

Canada employment grew by +10K in November vs. +108K in October; the unemployment rate ticked lower to 5.1% vs 5.2% previous

NZD Pairs

Overlay of NZD Pairs: 1-Hour Forex Chart

Overlay of NZD Pairs: 1-Hour Forex Chart

The New Zealand Institute of Economic Research: Inflation and rising interest rates remain key headwinds for the economy

New Zealand ANZ business confidence index slipped from -42.7 to -52.1 in Nov.

New Zealand building consents slumped 10.7% m/m in Oct.

New Zealand Q3 overseas trade index declined by 3.4% q/q vs. projected 0.4% uptick

AUD Pairs

Overlay of AUD Pairs: 1-Hour Forex Chart

Overlay of AUD Pairs: 1-Hour Forex Chart

RBA head Lowe refrains from hinting at faster pace of rate hikes; sees a better chance that Australia may have a ‘soft landing’ than peers

Australian retail sales down 0.2% m/m in Oct. vs. projected 0.5% uptick

Australian CPI tumbled from 7.3% to 6.9% y/y in Oct vs. 7.6% forecast

AIG’s manufacturing index drops from 49. to 44.7, the first contraction in three months

Australia’s business investment dips by 0.6% q/q in Q3 vs. 1.5% uptick in Q2

S&P Global Australia Manufacturing PMI for November: 51.3 vs. 52.7 in October

RBA Gov Lowe: Inflation expectations are still well-anchored

JPY Pairs

Overlay of Inverted JPY Pairs: 1-Hour Forex Chart

Overlay of Inverted JPY Pairs: 1-Hour Forex Chart

BOJ Gov. Kuroda: Wage gains supportive of more stable inflation

Japan’s unemployment rate unchanged at 2.6% in October

Japan’s retail sales expands by 4.3% y/y in October vs. 5.0% uptick expected and September’s 4.8% growth

Japanese preliminary industrial production down -2.6% m/m in Oct. vs. -1.7% m/m in Sept.

Japan housing starts for October: -1.8% y/y vs. -1.3% y/y forecast