Aussie Soars As CPI Hits 33-year Highs

Q4 Inflation Spikes HigherThe Australian Dollar is seeing a flood of demand today on the back of the latest CPI figures, released overnight. Aussie inflation was seen spiking back up to 1.9%, quarter-on-quarter, up from 1.8% prior and above the 1.6% the market was looking for. The year-on-year figure was seen rising back up to 8.4%, a more than 1% jump from the prior 7.3% reading. The Q4 inflation reading marked its highest level since January 1980, driven by increases in transport costs, food prices and new dwelling construction costs.RBA ConcernsIn all, these inflation readings paint a worrying picture for the RBA. On the monthly figure, after flattening out for two months, prices have started to lift again. While there are certain factors recently which might have contributed to a temporary spike in inflation (bad weather, supply issues), the quarterly reading is worrying and suggests that the RBA still has further to go with its tightening program. The bank was among the first to pivot on rates last year and there is some concern now that the bank might have slowed the pace of tightening too early and will now need to play catch up to bring inflation down again.Holiday Costs See Big JumpLooking at the breakdown of the data there are some interesting points indeed. Holiday prices, which spike 11% on the prior month in December 2021 were seen spiking 27% in December 2022. Recreation costs were also seen jumping more than 10% on the prior month. These marked the two biggest cost increases. Given that December is a key holiday time in Australia, there is some credence to viewing these increases as transitory cost jumps which will likely flatten out now.AUD Well Bid Following DataHowever, the market reaction is key here. Aussie government bond yields have spiked on the back of the release. AUD too has been higher across the board, reflecting traders’ expectations that the RBA will either push ahead with a larger hike at the February meeting or signal that its tightening program will need to run longer than forecast. In both cases, AUD looks likely to remain well supported moving forward as the market re-prices the Aussie rate-path for the year ahead.Technical ViewsAUDUSDThe recent retest of the .6857 level has seen the Aussie turning higher again with price now having broken through initial 2023 highs to test the .7130 level. With momentum studies firmly bullish here and with the retail market heavily short, AUDUSD has room to move up to .7287 next.

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Weak UK PMI data points to further Pound weakness

Incoming data on the EU economy roughly correspond to the thesis put forward by the market that the EU bloc will be able to dodge a recession. The PMI index from S&P Global climbed into the positive zone in January, amounting to 50.2 points against the forecast of 49.8 points. Positive MoM dynamics are being observed for the first time since June last year.A number of factors contributed to the optimism, from a faster slowdown in inflation and improved supply chains to mild weather that helped the EU avoid an energy crisis.Activity indices in the EU's two largest economies, France and Germany, remained at levels below 50 points, but there was a surprising improvement in the service sector in Germany and in the manufacturing sector in France.The ECB has already raised rates by 2.5% and is expected to make another 50bp hike next week. What happens after is unclear: some Governing Council officials suggest it may be appropriate to slow down the pace of tightening, others continue to insist on the need for significant increases. The hawkish ECB case in 2023 finds its justification mainly in a strong labor market: employment continued to rise in December, supporting high wage growth, which usually generates the lion's share of domestic inflation.Unlike the EU, the situation in the UK is less rosy. The S&P Global PMI index for the British economy dived deeper into the recession zone, to 47.8 points in January against 49 points in December. This means that the rate of deterioration in activity has been accelerating this month:The negative momentum prevailed in the services sector, but manufacturers also reported that output declined in January at the fastest pace since the start of the pandemic. The pound fell by 0.6% after the release of the index for January. Market participants are beginning to price in the idea that the BoE will be forced to delay the moment for the tightening cycle. Traders are looking for another 50 bp hike, according to the current valuation in February and by 25 bp in March. Additional pressure on the pound was also exerted by the publication of data on the UK budget deficit. It swelled by £27.4bn from a forecast of £17.3bn, an outcome that calls into question fiscal stimulus hopes, raising the risk of a UK recession in 2023.From a technical point of view, GBPUSD has broken through the lower limit of the short-term range of 1.231 - 1.23, and now the next sellers' target is likely to be 1.2250. In the event that the price encounters weak resistance, there will be no potential bounce to 1.23 (which will already be a resistance zone) and the price will continue to move towards the main support at 1.22, as shown in the chart below:

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7 ways to reduce your inheritance tax bill

The inheritance tax threshold cap has been extended until 2028, which will result in higher tax bills for many - we look at how to keep you inheritance tax bill to a minimum.

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House prices could fall 30%. Should investors be worried about a repeat of 2008?

Some analysts are predicting that house prices could fall as much as 30%, which, when compared to the fact that prices have jumped 28% since April 2019 doesn’t seem too unrealistic. But could this cause another financial crisis?

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Market Spotlight: EZ Service Sector Back in Growth While UK Slumps Further

UK Service Sector in Trouble The latest set of PMI readings for the eurozone and the UK today highlighted some clear divergence with regards to economic performance between the two. In the eurozone, the services sector was seen moving back into positive territory last month, printing 50.7, up from 47.8 in November. This marked a strong increase and was above market forecasts for a 50 reading. However, in the UK, the services sector was seen falling further into contractionary territory at 48 from 49.9 previous, well below the 49.6 the market was looking for.Factory Sector Slightly Better Factory sector readings were similar. While in the UK there was a small improvement, at 46,7 from 45.3 prior the sector was still in negative growth territory last month. In the eurozone, the factory sector remained in negative territory also though at 48.8, up from 47.8 prior, was a little stronger than in the UK.Ongoing IssuesMuch has been made of the UK’s post-Brexit struggle and these latest business survey results show that these difficulties have not yet passed. While the BOE governor recently offered reassurance that the UK economy had turned a corner, there is still plenty of downside risk for the UK as Brexit, difficulties, covid disruption and ongoing industrial action continue to thwart many business sectors at a time when rates and inflation are both still elevated.Technical ViewsEURGBPThe latest test of .8869 saw the pair turning lower again. However, with the correction subsequently finding support at the .8719 level, price is now moving higher once more. For now, while price holds above the bullish trend line the focus is on a continuation higher and a break of the .8869 level opening the way for a move back up through last year’s highs.

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Market Spotlight: Microsoft Ramping Up Its AI Investment

Microsoft Announces 'Third Phase Investment In Open AI Shares in US tech giant Microsoft are trading around 1% higher ahead of the US open today. The move comes on the back of yesterday’s announcement that the company will strengthen its partnership with ChatGPT maker Open AI via a new multibillion dollar investment deal. While the exact figure is yet to be disclosed, there have been reports of a $10 billion sum.  The Microsoft blogost announcing the next stage of its involvement with Open AI, Microsoft outlined plans for additional supercomputer development as well as greater cloud-computing support for Open AI.Microsoft’s desire to become heavily involved with this latest cutting edge technology represents a big opportunity for investors. With AI now seen as one of the fastest growth areas in tech, Microsoft’s early backing of a Open AI could pay big dividends down the line especially judging by the popularity of ChatGPT which is seeing massive cross-sector application.Earnings Due Today Looking ahead today, Microsoft is due to report Q4 earnings with Wall Street looking for EPS of $2.29 on revenues of $52.99 billion. While there are some warnings that the company might see a smaller profit margin, results in this area should keep the stock well bid especially on the back of this news.Technical ViewsMicrosoftFollowing the latest test of the 218.95 level, the stock has since turned higher again and is now testing the 244.95 region. This is a key pivot for price, marking the midway point of the range between current lows and the 265.55 level. If price can break above here, focus turns to a test of the bearish trend line and the 265.55 level above.

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Daily Market Outlook, January 24, 2023

Daily Market Outlook, January 24, 2023 Tech Rally on Wall Street Sees Nikkei Back Above 27KThe Nikkei (the only major Asian market open during the lunar holiday week) managed to shake off a third successive monthly decline in manufacturing data to reclaim the pivotal 27k level, as markets were buoyed by another impressive led Tech rally, Tesla gaining nearly 8% on the day, as the Tech heavy Nasdaq100 was up over 2% trading above 11800. European bourses are set to follow suit with futures suggesting a positive open.In the UK data out this morning confirmed a year over year doubling in the public purse borrowing rising to £26.6Bln in December, however, it is thought that the 12 month deficit may still come in below forecasts, January;s data will be a key input to the final outcome as the January figure will contain HMRC tax revenues for the year. Datawise focus is on PMI releases, with both the manufacturing services data expected to remain in contractionary territory, printing below the pivotal 50 level, there is a chance that the services data may offer some modest growth driven by seasonal and world cup spending. The FTSE is currently the only European market currently trading in the red, driven by AstraZeneca and Glencore declines. In the Eurozone PMI data is also expected to see meagre gains on the services side of the ledger vehicle manufacturing is thought to lag remaining sub 50 suggesting contraction in the sector continues, however, regional data just released by France saw a surprise gain in the manufacturing sector, printing 50.6. ECB Chief Lagarde is due to speak again today. With the BoE and FOMC moving into their respective black out periods, given the proximity of their policy announcements) Lagarde is expected to once again reiterate her hawkish stance.The US data slate is also dominated by PMI data due later today, with both readings believed to remain in contractionary territory, key for US investors will be whether next weeks ISM data confirms the PMI prints as the ISM releases tend to be tracked more closely by US investorsMarkets-wise, in the UK BHP have signed a partnership deal with Munduro Capital to assess the feasibility of copper mining in Serbia. The National Grid are offering discounts to customers who agree to use less electricity during peak consumption hours as a means to avoid black out periods during excessive consumption periods. After the close of US trading today tech stalwart Microsoft is set to announce earnings, given the recent rise in MSFT share price and the broader gains in the tech sector, investors will be looking for decent forward guidance to maintain the rally, any meaningful downgrades on outlook would see investors paring risk appetite ahead of Tesla earnings due tomorrow. Overnight News of NoteAsian Shares Climb In The Wake Of Tech-Stock Fuelled GainsBank Of Japan Eases Bond Market Strains With Loans To BanksJapan's Factory Activity Extends Declines For Third Straight MonthAustralian Business Conditions Fall For A Third Straight MonthPresident Biden Set To Hammer GOP National Sales TaxECB Policymakers Spar On Rate Outlook Beyond Feb HikeDollar In Doldrums As Euro Near 9-Month Peak, Yen BouncesOil Steadies As Traders Look To China To Deliver Demand BoostUS Weighs Cancellation Of Next SPR Sale – Energy IntelAsian Shares Climb In The Wake Of Tech-Stock Fuelled GainsDOJ Poised To Sue Google Over Digital Ad Market DominanceEU Lawmakers To Vote On Tighter Crypto, ESG Rules For Banks(Sourced from Bloomberg, Reuters and other reliable financial news outlets)Options Expiration For the New York Cut 10am EST(BOLD expiries with  a value of a Billion+more magnetic if price is within the daily trading range)USDJPY 131.00AUDUSD 0.7000USDCAD 1.3450Technical & Trade ViewsSP500 Bias: Intraday Bullish Above Bearish Below 3995Primary support is 3869Primary objective is 4055Below 3840 opens 380020 Day VWAP bullish, 5 Day VWAP bullishEURUSD Bias: Intraday Bullish Above Bearish below 1.0835Primary support  is 1.0750Primary objective is 1.10Below 1.0730 opens 1.061020 Day VWAP bullish, 5 Day VWAP bullishGBPUSD Bias: Intraday Bullish Above Bearish below 1.2320Primary support  is 1.2250Primary objective 1.2460Below 1.2240  opens 1.218520 Day VWAP bullish, 5 Day VWAP bullishUSDJPY Bias: Intraday Bullish above Bearish Below 131.50Primary resistance is 132.30Primary objective is 125.00Above 133.00 opens 135.0020 Day VWAP bearish, 5 Day VWAP bullishAUDUSD Bias: Intraday Bullish Above Bearish below .7060Primary resistance is .7060Primary objective is .6939Above .7060 opens .711020 Day VWAP bullish, 5 Day VWAP bullishBTCUSD Bias: Bullish Above Bearish below 22300Primary support 21600Primary objective is 23700Below 21500 opens 2070020 Day VWAP bullish, 5 Day VWAP bullish

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When will UK inflation fall back to the BoE’s target?

Inflation has started to slow, but it could remain high for some time as underlying pressures build

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How to invest in ChatGPT and other AI tech changing the world

Technology, like ChatGPT, is changing the way we live and work, and this new tool could have a huge impact on the tech industry says Dominic Frisby.

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Bitcoin Might Reach New Heights Soon

Bitcoin broke the level of 22500. Currently, it remains flat before the next jump. So far, this asset is likely to hit the level of 25000. Next, Bitcoin might pull back from this level and undergo a large-scale correction. The asset could potentially gain the required support at the level of 21000 and jump. The price of Bitcoin might also rise from the current point, considering the formation of a flag or a pennant signifying the continuation of the current trend. So, let’s observe what will happen next.The currency pair EUR/USD has pulled back from the broken level of 1.0785. The asset might face resistance at the level of 1.1100. The price of this currency pair might jump at the beginning of next week.American index S&P 500 has pulled from the broken level of 3920 and formed an engulfing at the end of the trading week. This signifies a potential price growth. Once the price of the index approaches the downtrend, it might either slow down a bit or reverse and pull back down. Only time will tell what is about to happen next.

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Market Spotlight: EUR Rallies on Hawkish ECB Comments

Knot Reaffirms Hawkish ECB OutlookEUR has started the week on a strong footing following further hawkish ECB commentary over the weekend. Dutch ECB member Klaas Knot told reporters over the weekend that he believes the ECB will hike rates by a further .5% at both the upcoming February and March meetings. Furthermore, Knot warned that the bank would not be done following these adjustments and cautioned markets to expect more action in both May and June.Looking beyond that, Knot said that it was hard to tell if the ECB would be done tightening by summer but suggested that of course there would come a time when the inflation outlook was more balanced. In that scenario, Knot suggested the bank could then step tightening back a level though said that the ECB is still far away from that point currently.Knot’s comments come fresh on the back of last week’s comments from ECB chief Lagarde. Lagarde warned that inflation was still way too high in the eurozone, reaffirming the need for the ECB to keep pushing ahead with rates until CPI was back at its 2% target.ECB Not Pivoting Anytime SoonThese recent ECB comments suggest a clear effort on behalf of the bank to push back against any speculation that it might be close to pivoting on rates. With the Fed mid-pivot and other central banks pivoting or close to pivoting, the ECB has reaffirmed its view here, making the lines around policy divergence between itself and other central banks quite clear. In light of this, EUR looks likely to stay well supported near-term particularly against USD and JPY.Technical ViewsEURUSDThe rally in EURUSD has seen the market pushing higher within a clear bull channel off last year’s lows. Price is currently testing above the 1.0785 level and, while it holds above here, the focus is on a further push higher towards the 1.1126 level next. However, we are seeing bearish divergence in momentum studies and should price slip back below the level, focus will turn to the channel support and 1.0346 next.

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Market Spotlight: AZN Shares At Risk of Deeper Drop

AZN Stock Under Pressure Shares in UK-headquartered AstraZeneca are back under heavy selling pressure on Monday as the stock extends recent losses. Now trading down by almost 7% from the 2023 highs, the company recently outlined plans to buy US bio-tech Firm Cin Cor for $1.8 billion. However, it seems that stockholders are not overly enthusiastic about the deal given the current price action we’re seeing.Sales DisappointmentsOne reason for this, perhaps, is that the company has been suffering from weaker earnings growth when compared with the rest of the industry. The current decline is suggesting there is some caution about such a big outlay of capital at the start of the New Year. The stock is also likely suffering from the impact of recent sales disappointments. AstraZeneca announced last week that it was pulling its Lumoxiti (treatment for rare blood cancer) from US markets on the back of poor sales results. This comes a few years after the drug was also pulled in Europe, again due to unsatisfactory results.Near-Term Downside RisksWhile The company has seen a solid string of earnings reports since the last negative quarter in Q3 2021, there is perhaps some hesitation with AZN viewed more as a dividend stock than an earnings growth stock. The company saw its value balloon over the early part of the pandemic as profits linked to its covid vaccine helped drive valuations higher. However, as more companies brought their vaccines to market these profits have been eroded. While the stock remains well above pre-pandemic levels for now, risks of a deeper correction are growing with the upcoming earnings reportTechnical ViewsAZNThe stock has been moving with a shallow bullish channel over the last 9 months. However, we’ve seen strong bearish divergence on each fresh peak and with price having now reversed back under the 11538 level there is risk of a deeper run down towards the bottom of the channel, ahead of deeper support at the 9534 area.

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Precious Metals Monday 23-01-2023

Metals Market Reflects Uncertainty Ahead of Fed The metals market has certainly had an interesting start to the year. While golds futures have been broadly higher, breaking out to fresh YTD highs in consecutive weeks, price action in silver has been much more laboured. With gold prices starting the new week with a more offered tone, we are now looking at the prospect of a correction lower near-term. This is more interesting given the subdued action we’re seeing in US Dollar. In short, current price action reflects a great deal of uncertainty and indecision in the market ahead of the upcoming FOMC meeting next week.Recently, there has been a growing view that the Fed will look to pivot further when it meets next week, opting for a smaller .25% hike (down from December’s .50% hike). If seen, this would certainly send USD lower near-term, creating room for metals prices to advance higher. However, if the Fed surprises markets and sticks with a further .5% hike, this would likely be firmly bullish for USD near-term, fuelling an unwinding of short positions which would see metals prices moving quickly lower once more.With the Fed now in its pre-meeting blackout period and with Chinese markets offline all week for the holiday there, focus will likely turn to incoming economic data. A slew of global PMIs this week as well as US advanced GDP and core PCE will be the headline readings to watch. Additionally, developments within the US earnings backdrop will be closely watched. Any fresh concern around recession risks will likely lend themselves to increased safe-haven support for metals.Technical ViewsGoldThe rally in gold prices has become a little more laboured recently though, for now, the focus remains on further upside. Price is currently holding above the recently broken 1916.34 level and, while above here, the focus is on a further push higher towards 1973.51 next. Worth noting we are seeing some bearish divergence on momentum studies, however. If price moves back under the current level, 1871.04 is the next support to note.SilverThe price action we’ve seen in silver recently has been very frustrating for bulls and bears alike. Price is essentially caught in a choppy range, oscillating around the 24.0073 level. While still within the bull channel off last year’s lows, focus remains on a further push higher and an eventual move up to the 26.0974 level next. However, should we slip lower from here 22.3205 is the next support to note.

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The Year of the Rabbit: is it time to invest in China?

This weekend marks the Chinese New Year - but what will the Year of the Rabbit bring to investors looking to invest in China after a turbulent 2022?

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