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U.S. stocks opened higher but closed lower, with the Dow Jones Industrial Average and S&P 500 both turning negative.Ukrainian President Zelensky: Ivashenko, the head of the Foreign Intelligence Service, will be appointed as the new head of the Military Intelligence Service.Intel (INTC.O) extended its gains to 8%.On January 2nd, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, stated that while manufacturers continued to increase output in December, suggesting the goods-producing sector will contribute to further strong economic growth in the fourth quarter, the outlook for early 2026 looks less optimistic. In fact, the gap between production growth and declining orders is the largest since the 2008-2009 global financial crisis. Unless demand improves, current factory production levels are clearly unsustainable. If production capacity has to be reduced, employment will also be adversely affected. A key factor contributing to concerns about sales is the extent to which producers will have to pass on higher costs to consumers in the form of price increases, with the cost increases still largely attributed to tariffs. Input cost inflation slowed to its lowest level since January of last year in December, providing some encouragement. However, while this cost trend suggests that the impact of tariffs on inflation peaked as early as the summer, costs are still rising at a high rate month-on-month, indicating that cost increases for U.S. businesses continue to outpace those of their competitors in most other major economies.The final reading of the S&P Global Manufacturing PMI for December in the United States was 51.8, in line with expectations and the previous reading of 51.8.

As investors anticipate US Services PMI, the USD/JPY pair falls to around 134.00

Daniel Rogers

Dec 05, 2022 14:09

 USD:JPY.png

 

The USD/JPY pair attempted to surpass the immediate barrier of 134.50 during the Tokyo session. As investors anticipate fresh momentum from U.S. Services PMI data, the asset is expected to remain on tenterhooks. As Federal Reserve (Fed) policymakers do not expect the current rate of interest rate hikes to continue, the risk profile remains favorable.

 

Charles Evans, president of the Chicago Fed, was quoted by Reuters as saying on Friday, "We will likely have a little higher Fed policy rate peak even as we slow the pace of rate hikes."

 

The US Dollar Index (DXY) is hovering near its immediate support level of 104.50 and is likely to test Friday's low at 104.40. In the context of a significant decline in the desirability of safe-haven assets, the risk appetite theme is likely to continue exerting pressure on US Dollar bulls.

 

In the interim, 10-year US Treasury rates have increased after falling below 3.50 percent during the Asian session, as market sentiment turns cautious prior to the release of US Services PMI data. The projected economic statistics is 55.6, a decline from the previous report of 54.4.

 

The New Orders Index is expected to rise from 56.5 to 58.5 on the US Services PMI spectrum. This indicates that future demand will be robust, which might de-anchor short-term inflation expectations and ruin the risk-on profile.

 

On the Tokyo front, Governor of the Bank of Japan (BOJ) Haruhiko Kuroda stressed the potential of a decrease in inflation beginning in CY2023. This may encourage the BOJ to continue easing monetary policy in order to keep inflation near the 2% target. Total Household Expenditures statistics will be of the utmost relevance in the future. The economic data are projected to increase annually by 3.4%, up from 2.3% in the previous report.

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