Market recap: Week of 16-20 Oct 2023

Yen currency drops

Reuters: A senior IMF official sees the yen currency's recent drops as fundamentally driven and not warranting currency market intervention.

While there are upside inflation risks due to strong demand, the BOJ remains cautious about raising rates amid global demand uncertainties.

Civil unrest

Mining.com: Gold prices surged this week amid escalating geopolitical tensions. Investors who had shorted gold were forced to cover their positions as prices climbed higher. The tragic events in Palestine propelled gold even further upwards, with the precious metal seen as a safe haven in times of uncertainty.

Periods of global turmoil often spur demand for gold as anxious investors seek to shield their capital. Thus, gold prices rallied in response to the recent turmoil, buoyed by its reputation as a store of value during volatile times.

Yen currency intervention

Reuters: Japan's Ministry of Finance and IMF differ on Yen decline response. MOF's Kanda suggests a readiness to act and intervene, considering various factors, including interest rates. IMF official underscores fundamental-driven yen declines, negating intervention need.

Oil market prices

Reuters & Yahoo Finance: Chief Economist Lane stated that the European Central Bank needs more time to confirm inflation's return to the 2% target. And keeping a high rate until at least Spring next year. President Lagarde monitors the Israel-Hamas conflict's potential impact on oil prices. 

US retail sales

Reuters: U.S. retail sales surged 0.7% in September, beating expectations, indicating a boost in economic growth. Goldman Sachs raised Q3 GDP growth estimate to 4%.

Yet, American credit card balances hit a record high of $1.03 trillion, with growing payment delinquencies, revealing the strain on consumers amid rising costs and interest rates.

High mortgage rates

ABC.net: Reserve Bank Governor warns of prolonged inflation risks amid global shocks. Higher mortgage rates already impacting the economy, says Ms. Michele Bullock.

Further interest rate hikes may be necessary if inflation expectations persist at elevated levels.

US government shutdown

FX Street and BBC: Jim Jordan's second attempt to become US House Speaker failed.  Without a Speaker, Congress cannot pass legislation or provide emergency aid, potentially affecting critical deadlines. One such deadline is the looming Nov. 17 requirement to pass a spending bill and avoid a government shutdown. There have been six partial or full government shutdowns since 1990.

History suggested a potential 1%-1.5% dip in the US dollar index following a shutdown, with subsequent recovery suggesting a limited long-term impact on the currency.

UK inflation

Express: Treasury minister Andrew Griffith asserts the Government's commitment to halving inflation by year-end, remaining on course.

Despite higher inflation data for September, Bank of England Governor Andrew Bailey is cautioned against hasty interest rate hikes. UK's September inflation remains at 6.7%

Energy security

Energy.GOV: The U.S. DOE's Office of Petroleum Reserve will regularly seek to buy oil for the Strategic Petroleum Reserve (SPR) through May 2024.

The initiative kicks off with a solicitation for up to 6 million barrels of oil, set for delivery between December 2023 and January 2024.

Their target is to secure oil at or below $79 per barrel, a cost significantly lower than the average of $95 per barrel in 2022's emergency SPR sales.

Federal reserve

NYTimes: Fed Chairman Powell addressed the challenges faced by the Fed. Balancing inflation control and economic well-being is the aim.

Interest rates have climbed to 5.25-5.5%, curbing economic activity, but growth remains robust.

While no rate hike is expected at the Nov. 1 meeting, Powell's remarks hint at future potential increases, keeping the December 13 meeting in focus