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Market movers today

The G20 summit concludes in Bali and we look out for whether the communiqué indeed rejects an 'era of war' as previously rumoured.

Market focus will be on the US retail sales for October, especially after last week's inflation downside surprise. Slowing consumption remains a necessary (though not sufficient) condition for a sustainable easing in inflation pressures. But it would not be the first time that US consumer spending has surprised on the upside amid elevated wage growth and high savings.

UK inflation could take another jump up in October, largely driven by a rise in utility bills. Bank of England Governor Bailey will appear before the Treasury committee to answer questions about monetary policy. ECB President Lagarde will give a speech in Frankfurt.

The 60 second overview

Last night, we heard initial reports of a Russian missile strike on Polish soil, near the Ukrainian border at the same time as a missile attack on Ukraine. Since then, however, both President Biden and his Polish counterparty Duda have questioned whether the missile was fired from Russia and there is still great uncertainty on the matter. President Duda has further commented that he is likely to invoke NATO article 4, meaning that the alliance will meet and discuss before any potential response and it is reported that NATO ambassadors will hold an emergency meeting this morning. Until we get more clarity on the matter, geopolitical tensions are likely to run high for the time being.

However, the missile attack on Ukraine was strongly condemned by NATO and G7. The Polish currency has weakened modestly vs. the EUR, 10Y US Treasury yields declined a few bps yesterday, but the yield has risen this morning in Asian trade. The missile attack will most likely also dominate the conclusions from the G20 meeting that ends today.

Yesterday, there were more comments from various Federal Reserve officials that the inflationary pressure is easing and that the size/pace of rate hikes is likely to slow.

We have UK inflation for October today and expectations are for a jump up to 10.7% in headline inflation compared to 10.1% in September, mainly driven by the new energy price cap (+27%) introduced in October. The core inflation on the other hand, is expected to print 6.4%, down from 6.5% in September. However, we do note that the range for estimates is very broad according to Bloomberg, both regarding the estimate for core and headline and the risk seems rather to be skewed towards the downside in core inflation.

Equities: Equities continued its march higher but with growth and quality stocks taking the lead again. This was driven a second confirmation on lower inflation ahead from the PPI figure. Equities even defied the news that Russian missiles killed two at the Polish border (i.e. NATO territory). Most sectors higher but communication services and retail leading. Futures are unchanged this morning.

FI: There was a solid rally in global fixed income markets yesterday driven from the long end of the curve. 10Y Bunds declined some 5-6bp, while 10Y Treasuries declined 6bp. Furthermore, the German ASW-spreads continue to tighten. The missile attack on Ukraine and the hits on Poland supported safe-haven flows into Treasuries.

FX: Initial reports of a Russian missile hitting Polish soil last night triggered a classic risk-off movement in FX: stronger USD and JPY, weaker SEK and even more weakness within CEE, where PLN took the blunt of the hit. These move have reversed somewhat over the night as there are conflicting reports whether the missile actually is from Russia or not. Nevertheless, tensions are running high.

Credit: Sentiment remains very strong in credit markets and yesterday iTraxx Xover tightened 13.5bp, closing in 463bp, while Main tightened 3bp to close in 93bp.

Nordic macro

In Sweden, Prospera's November money market inflation expectations are out at 08.00 CET. This is unlikely to rock the market as yesterday's October inflation print solidified the 75bp rate hike that the market is already pricing (Riksbank's forecast is 50bp). It would take a huge upside move in 5y expectations to, say, raise the bet for 100bp hike next week and that seems unlikely.

UK CPI accelerated from 10.1% yoy to 11.1% yoy in October, above expectation of 10.6% yoy. That's highest level since 1981 based on modelled data. Core CPI was unchanged at 6.5% yoy, above expectation of 6.4% yoy.

ONS said, "Despite the introduction of the government's Energy Price Guarantee, gas and electricity prices made the largest upward contribution to the change in both the CPIH and CPI annual inflation rates between September and October 2022."

"Rising food prices also made a large upward contribution to change with transport (principally motor fuels and second-hand car prices) making the largest, partially offsetting, downward contribution to the change in the rates."

Also released, PPI input came in at 0.6% mom, 19.2% yoy, versus expectation of 1.0% mom, 17.7% yoy. PPI output was at 0.3% mom, 14.8% yoy, versus expectation of 0.0% mom, 14.8% yoy. PPI core output was at 0.5% mom, 13.3% yoy, versus expectation of 1.3% mom, 14.0% yoy.

Full CPI release here.

Daily Pivots: (S1) 164.42; (P) 165.32; (R1) 166.25; More...

Intraday bias in GBP/JPY stays neutral first. Strong rebound from current level, followed by break of 166.06 minor resistance will turn bias back to the upside for retesting 172.11 high. However, sustained trading below 38.2% retracement of 148.93 to 172.11 at 163.25 will bring deeper decline to 61.8% retracement at 157.78 and possibly below.

In the bigger picture, there is no clear sign of medium term topping yet. Up trend from 123.94 (2020 low) could still resume through 172.11 high at a later stage. However, firm break of 159.71 support will argue that it's already in correction to the up trend from 123.94, and deeper decline would be seen back towards 148.93 support.

Daily Pivots: (S1) 143.25; (P) 144.31; (R1) 145.25; More....

Intraday bias in EUR/JPY stays mildly on the upside at this point. Correction from 148.38 might have completed at 142.54, after hitting 38.2% retracement of 133.38 to 148.38 at 142.65. Further rally would be seen to retest 148.38 high. However, on the downside, sustained break of 142.65 will bring deeper fall to 61.8% retracement at 139.11 and possibly below.

In the bigger picture, there is no clear sign of medium term topping yet. Up trend from 114.42 (2020 low) could still resume through1 48.38 to 149.76 (2014 high). However, break of 137.32 support argue that a medium term correction has already started to correct the whole up trend from 144.42.

Daily Pivots: (S1) 0.8685; (P) 0.8746; (R1) 0.8781; More...

Intraday bias in EUR/GBP remains neutral for the moment. On the upside, break of 0.8827 will resume the rise from 0.8570 to 0.8869. Sustained break there will pave the way back to retest 0.9267 high. On the downside, below 0.8689 minor support will turn bias back to the downside for 0.8570 instead.

In the bigger picture, current development suggests that fall from 0.9267 is a down leg inside long term range pattern. Deeper fall could be seen towards 0.8201/8338 support zone. But strong support should be seen there to bring reversal. Nevertheless, firm break of 0.8869 resistance will turn favor to the case that such decline is merely a correction in the up trend from 0.8201. That is, further rally would be seen at a later stage through 0.9267.

Daily Pivots: (S1) 1.5218; (P) 1.5352; (R1) 1.5446; More...

EUR/AUD is extending the consolidation pattern from 1.5704 and intraday bias remains neutral. In case of deeper fall, downside should be contained by 55 day EMA (now at 1.5252) to bring rebound. On the upside, break of 1.5704 will resume larger rise from 1.4281. However, sustained trading below 55 day EMA will bring deeper correction towards 1.4965 resistance turned support.

In the bigger picture, a medium term bottom should be in place at 1.4281, on bullish convergence condition in daily MACD. Further rise would be seen back to 1.6434 key resistance next. Break of 1.4965 resistance turned support is needed to indicate reversal. Otherwise, further rally will remain in favor.

Daily Pivots: (S1) 0.9720; (P) 0.9780; (R1) 0.9837; More....

Some volatility is seen in EUR/CHF and intraday bias stays neutral at this point. On the downside, break of 0.9720 will extend the fall from 0.9953 to 61.8% retracement at 0.9616, and possibly below. On the upside, however, break of 0.9839 resistance will turn bias back to the upside for retesting 0.9953 instead.

In the bigger picture, rejection by 0.9970 support turned resistance retains medium term bearishness. That is, while 0.9407 is a medium term bottom, price actions from there would develope into a corrective pattern rather than a reversal. That is, down trend resumption through 0.9407 is favored at a later stage. This will remain the favored case now, as long 38.2% retracement of 1.1149 to 0.9407 at 1.0072 holds.

Daily Pivots: (S1) 1.3226; (P) 1.3281; (R1) 1.3335; More....

Intraday bias in USD/CAD is turned neutral as it continued to lose downside momentum. Strong support could be seen from 1.3207 cluster support (61.8% retracement of 1.2726 to 1.3976 at 1.3204) to bring rebound. Break of 1.3494 support turned resistance will turn bias back to the upside. However, sustained break of 1.3204/7 will carry larger bearish implication and target 1.2952 support next.

In the bigger picture, as long as 1.3222 cluster support (38.2% retracement of 1.2005 to 1.3976 at 1.3223) holds, larger up trend from 1.2005 (2021 low) is still expected to resume through 1.3976 high at a later stage. . However, firm break of 1.3222/3 will indicate that the trend might have reversed. Deeper fall would be seen to next cluster support at 1.2726 (61.8% retracement at 1.2758).

Daily Pivots: (S1) 0.6696; (P) 0.6747; (R1) 0.6808; More...

AUD/USD's rise from 0.6169 is in progress and intraday bias stays on the upside. Next target is 161.8% projection of 0.6169 to 0.6521 from 0.6271 at 0.6841. On the downside, below 0.6662 minor support will turn intraday bias neutral and bring consolidations, before staging another rally.

In the bigger picture, the break of 0.6680 support turned resistance confirms medium term bottoming at 0.6169. It's too early to call for trend reversal. But even as a corrective move, rise from 0.6169 should target 38.2% retracement of 0.8006 to 0.6169 at 0.6871. Sustained trading above 55 week EMA (now at 0.6934) will raise the chance of the start of a bullish up trend. This week now remain the favored case as long as 0.6521 resistance turned support holds.

Daily Pivots: (S1) 137.80; (P) 139.20; (R1) 140.73; More...

Intraday bias in USD/JPY is turned neutral again with current recovery. Stronger rise cannot be ruled out, but upside should be limited below 145.16 support turned resistance. Break of 137.66 will resume the decline from 151.93, to 133.07 fibonacci level, as a correction to the larger up trend.

In the bigger picture, a medium term top should be formed at 151.93. Fall from there is correcting larger up trend from 102.58. It's too early to call for bearish trend reversal. But even as a corrective move, such decline should target 38.2% retracement of 102.58 to 151.93 at 133.07, or further to 55 week EMA (now at 130.58).