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Amidst all the debate of whether the US is heading into a recession this year, we get the first look at last year's GDP figures. This could be the biggest market moving event of the week, especially if expectations are not met. And there is something of a wide range of forecasts. The Fed's GDPNow tool is saying it will be 3.5%, while the consensus among economists is that it will be 2.6%. That compares to the prior quarter's revised 3.2% result.

But it's important to remember that just as a country can have a "technical recession", it can have "technical growth" as well. One of the main drivers for third quarter GDP growth was an unexpected decline in imports. Meaning that the trade calculation contributed to GDP, but only because Americans were buying less.

It's all inflation's fault

Given the context of high inflation at the time, it's logical Americans were buying less. At the time, the dollar was relatively strong, meaning that imports constituted deflationary pressures. Since then, the dollar has gotten weaker in anticipation that the Fed will stop raising rates. That means imported goods have increased in price, which could technically support a growing GDP figure.

The other interesting factor is that a recent review of leading indicators by the Conference Board showed that all segments of the US economy were decreasing except for two. Those were employment and personal consumption. The unemployment rate remains remarkably low, just a couple decimals off a multi-decade low. But that is likely because it's still dislocated from covid.

Where's the money coming from?

Turning to address the personal consumption factor, Americans have been spending down their savings of late. More worrisome for the long-term resilience of the economy, they have been taking on increasing amounts of debt. Major US banks pointed this out in their latest earnings, as deposits have diminished. Concurrently, net charge-offs (a measure of distressed debt) have been creeping higher, as Americans struggle to pay for their credit cards.

The head of JPMorgan, who's rather pessimistic about the economic future of the US, pointed to the rate of savings among his bank's customers is dwindling and would run out by October of this year. If interest rates remain high, it would be much harder for people to take on debt to continue spending. The largest driver of the US economy, and one of only two positive sectors at the moment, is dwindling.

Gauging the market reaction

The market might not particularly like a good GDP figure, since that would imply the Fed could keep hiking in order to tame inflation. But, even if that hurts stocks, it could give the dollar a bit of a boost. Meanwhile, a disappointing figure could give the markets some relief over rate hikes, as it could be interpreted as a sign that the Fed's forecasts are a little too optimistic, and they might even have to cut rates in the near future.

The Fed meets next week, and there is a pretty solid consensus that there will be just a 25bps hike. This is the last major data point before the meeting, because January NFP figures won't be released until the Friday after the FOMC. Therefore this data could be pivotal for expectations for the Fed.

The S&P 500 was flat yesterday, as investors tried to make sense of the deluge of company earnings that hit the fan before, during and after the session. Microsoft didn’t gain on better-than-expected earnings, and Tesla announced record profits, but the share price jumped only 5% in the afterhours.

We are apparently stepping into a period where earnings projections outweigh the better-than-expected results. It makes the price moves harder to predict, however, it also gives us a hint that the S&P500 may have topped a couple of days ago, and more importantly, the market may soon get the fading recession odds straight, if the economic data continues surprising to the downside, as it has been the case at many prints since the start of the year.

The positive price action in stocks, and the positive price action in bonds suggest that the recession odds became less for stock traders, and more for bond traders since the start of this year.

In this sense, the odds for central bank policies are also evolving to the dovish side – or mostly.

Bank of Canada hiked its bank rate by 25bp yesterday and announced to pause.

The BoC decision spurred the expectation that the Federal Reserve (Fed) could do the same: hike by 25bp next week then pause.

This is certainly why the dollar index remained under pressure yesterday. The EURUSD is again above 1.0920, as the RSI index warns that the rally is extending into the overbought territory.

For the Bank of England (BoE), investors are almost sure that the year will end with a 25bp hike due to slowing economy, but Cable is above 1.24 this morning, as some traders still think that the BoE will have to address higher inflation before slowing economy.

In Australia, however, the surprise rebound in Australian inflation, spurred the Reserve Bank of Australia (RBA) hawks yesterday, and accelerated the Aussie’s appreciation against the dollar.

In summary, investors’ hearts will continue to swing between slowing economy and easing inflation, and the bumps in inflation along the way.

But the data will tell who is right and who is wrong. Today, the US will reveal the Q4 GDP data, and the US economy may have grown at a slower pace of 2.6%, versus 3.2% printed earlier. Core durable orders on the other hand may have contracted in December. So any softness, or worse, any disappointment could further weigh on stocks.

Or not! The direction is very blurry at the moment and the deluge of economic data and earnings could tilt market sentiment in either way.

Intel, Mastercard, Visa and American Airlines are among companies to report their Q4 earnings today in the US, Volvo and LVMH will report their results in Europe. Chevron and American Express will be going to the earnings confessional tomorrow.

Elsewhere, news from China is not bad. Both travel and box office numbers show that Chinese people are spending money for travel and leisure. And the latest reports suggest that Chinese households added a massive $2.6 trillion to their bank accounts last year. All this money could be spent on new iPhones, new Louis Vuitton bags, new Tesla cars, and could temper the recession odds.

Daily Pivots: (S1) 159.83; (P) 160.38; (R1) 161.25; More...

Intraday bias in GBP/JPY remains neutral and outlook is unchanged. On the downside, break of 155.33 low will resume the fall form 172.11 to 153.70 fibonacci level next. Risk will stays on the downside as long as 55 day EMA (now at 162.03) holds, even in case of another rally attempt.

In the bigger picture, as long as 163.02 support turned resistance holds, decline from 172.11 medium term top is expected to continue to 38.2% retracement of 123.94 to 172.11 at 153.70. Sustained break there will raise the change of trend reversal and target 61.8% retracement at 142.34. Nevertheless, break of 163.02 support turned resistance will argue that the decline has completed, and retain medium term bullishness.

Daily Pivots: (S1) 140.72; (P) 141.51; (R1) 142.26; More....

Intraday bias in EUR/JPY stays neutral as range trading continues. On the downside, break of 137.37 will resume the whole decline from 148.38 to 135.40 fibonacci level next. However, firm break of 142.84 will argue that the correction from 148.38 has completed, and bring stronger rise back to 146.71 resistance.

In the bigger picture, as long as 55 week EMA (now at 138.62) holds, larger up trend from 114.42 (2020 low) is still in progress for 149.76 long term resistance. However, firm break of 55 week EMA will bring deeper fall to 38.2% retracement of 114.42 to 148.38 at 135.40. Sustained break there will raise the chance of trend reversal, and target 61.8% retracement at 127.39.

Daily Pivots: (S1) 0.8783; (P) 0.8818; (R1) 0.8836; More...

Intraday bias in EUR/GBP is turned neutral again as it retreated well ahead of 0.8896 resistance. On the upside firm break of 0.8896 will resume the rise from 0.8545 and target 61.8% projection of 0.8545 to 0.8896 from 0.8720 at 0.8937. On the downside, break of 0.8720 will resume the fall from 0.8896 instead.

In the bigger picture, the notable support from 55 day EMA (now at 0.8752) retains near term bullishness. Break of 0.8896 should target 0.9267 (2022 high) and possibly above, to resume whole up trend from 0.8201 (2022 low). However, break of 0.8270 support and sustained trading below 55 day EMA will set the stage for 0.8545 and below.

Daily Pivots: (S1) 1.5291; (P) 1.5386; (R1) 1.5462; More...

Intraday bias in EUR/AUD remains on the downside with focus on 1.5271 support. Decisive break there will carry larger bearish implication. Deeper decline would then be seen to 61.8% retracement of 1.4281 to 1.5976 at 1.4928. Nevertheless, rebound from current level, followed by break of 1.5499 minor resistance, will revive near term bullishness for 1.5749 resistance and above.

In the bigger picture, it's still early to confirm if rise from 1.4281 represents bullish trend reversal. But as long as 1.5271 support holds, such rally is in favor to continue. Break of 1.5976 will target 1.6434 key resistance next. On the other hand, firm break of 1.5271 will retain medium term bearishness instead.

Daily Pivots: (S1) 0.9998; (P) 1.0034; (R1) 1.0055; More....

Intraday bias in EUR/CHF retreated ahead of 1.0095 and intraday bias is turned neutral first. On the downside, break of 0.9952 minor support will turn bias back to the downside, to extend the corrective pattern from 1.0095 with another leg, back towards 0.9873 support. On the upside, firm break of 1.0095 will resume whole rally from 0.9407 low.

In the bigger picture, the initial rejection by 55 week EMA (now at 1.0039) mixed up the outlook. On the upside, sustained trading above 55 week EMA will raise the chance of bullish trend reversal. Rise from 0.9407 should then target 1.0505 cluster resistance (2020 low at 1.0505, 61.8% retracement of 1.1149 to 0.9407 at 1.1484). However, firm break of 0.9832 support will revive medium term bearishness and bring retest of 0.9407 low instead.

Market movers today

In the US, GDP figures for Q4 2022 are on the agenda today, where we look for growth of 2.8% q/q AR. It's worth noting though, that the relatively high figure largely reflects fairly strong October activity and the continuing positive contribution from net exports, while December data and most leading indicators suggest that private consumption growth will clearly slow down in Q1 23.

In Sweden, NIER's January confidence survey should give important signals of the economy, while the December trade balance appears unlikely to buck the previous 2022 trend with increasingly bigger deficits.

The 60 second overview

ECB: ECB's Nagel said she would not be surprised if interest rates rose further after March and thus made final hawkish comments to the market before the silent period begins today before next week's ECB meeting.

Commodities: Industrial metal prices have risen more than 8% this year. The reopening of Chinese economy and sign the global manufacturing cycle has turned encourages the market. In addition, the weaker dollar supports higher prices.

Canada: Bank of Canada hiked its key policy rate 25bp to 4.5% yesterday. The move was expected by the market, which was surprised by the central bank's decision to signal its plan to keep interest rates on hold and assess impact on the economy from higher interest rates.

FI: Rates markets were a tale of two stories yesterday, which in the end left European core rates unchanged on the day. Spreads widened somewhat to the periphery in a steepening move yesterday amid peripheral bonds underperforming as Spain revised its 10y bond supply higher to EUR13bn. The bond sell-off extended through the BoC's decision to hike 25bp yesterday. They expect to hold the rates while they assess the impact. ECB policy peak repriced slightly lower earlier on the day to 3.40% as ECB enters silent period today.

FX: The CEE currencies continue to do well while NOK, NZD and CAD all took a setback in yesterday's session. EUR/USD moved above 1.09 while EUR/GBP has fallen back to the 0.88 mark. EUR/SEK remains just north of 11.10 while EUR/NOK has moved back above 10.80.

Credit: On Wednesday, credit markets were in risk-off mode along with equities, likely weighing the prospects of a weaker than expected corporate earnings season and outlook for 2023. Itrax main widened 1.5bp to close at 80.5bp and Itrax Xover widened 6.0bp to close at 422.4bp. Despite the soft risk-asset sentiment, primary markets were well functioning with TDC Net (BB issuer rating) printing a 7 year EUR benchmark SLB at MS+285bp. Books were more than four times oversubscribed and the deal printed 35bp tighter than the IPT of MS+320bp.

Daily Pivots: (S1) 1.0873; (P) 1.0899; (R1) 1.0940; More...

Intraday bias in EUR/USD is back on the upside as rally is trying to resume. Current rise from 0.9534 should target 61.8% projection of 0.9630 to 1.0733 from 1.0482 at 1.1164 next. On the downside, though, break of 1.0765 support should now indicate short term topping, and turn bias back to the downside for 55 day EMA (now at 1.0582).

In the bigger picture, current development suggests that the rally from 0.9534 low (2022 low) is a medium term up trend rather than a correction. Further rise is in favor to 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273 next. This will remain the favored case as long as 1.0482 support holds.

Daily Pivots: (S1) 1.2321; (P) 1.2363; (R1) 1.2442; More...

Intraday bias in GBP/USD remains neutral as range trading continues. On the downside, firm break of 1.2252 minor support will turn bias to the downside, and extend the corrective pattern from 1.2445 with another falling leg. On the upside, decisive break of 1.2445 will confirm resumption of whole rise from 1.0351. Next target will be 1.2759 fibonacci level.

In the bigger picture, rise from 1.0351 medium term bottom is at least correcting whole down trend from 1.4248 (2021 high). Further rise is expected as long as 1.1644 resistance turned support holds. Next target is 61.8% retracement of 1.4248 to 1.0351 at 1.2759. Sustained break there will pave the way back to 1.4248.