Friday Paper Charts
November 23, 2023
We appear to have another central bank joining the "done for now” camp. The oldest central bank in the world, the Swedish Riksbank, held the policy rate unchanged at 4% today, which came as a surprise. However, it maintained optionality about future rate hikes if inflation did not fall fast enough, which sounded similar to the Fed. The rate path was left largely unchanged since its September meeting, signalling an extended period of rates on hold to bring down inflation to its target of 2% on a sustainable basis.
Meanwhile, the ECB’s October meeting minutes indicate a deepening divide among council members despite unanimously agreeing to keep the deposit rate at 4%. Hawks in the council are cautious, emphasizing the difficulty of the final phase in achieving the 2% inflation target, particularly due to high wage growth and persistent services inflation.
On the flip side, dovish members are increasingly concerned about the risk of inflation falling below target and the impact of slowing economic growth, yet they haven't initiated discussions on the timing and conditions for a rate cut. Recent statements from council members like de Galhau suggest specific conditions for a rate cut, such as ECB inflation forecasts dropping below 2%, but it remains unclear if these conditions are widely accepted within the council. Overall, the council agrees on the need for vigilance and data-driven decisions while considering discussions on rate cuts as still premature at this stage. This is not surprising; the ECB, more so than other central banks, always fights the last battle, then panics usually too late.
In ATW’s charts for the week, I looked at the possibility of the SPX reaching the September 4600 mark. The momentum model had turned bullish almost 200 points ago after the reversal model highlighted a strong possibility for the index to bounce close to the lows. This is what those models are providing our subscribers every single week across various asset markets, including Rates, FX, Commodities and Crypto. There is no Black Friday sale. The price is cheap compared to other publications and the value it provides. Education is free, and that will always remain so.
Let’s now explore what’s in store across all those charts as of today's close of business.