US CPI data
The currency market was little changed on Tuesday morning as traders were waiting for US consumer price index (CPI) data ahead of the Fed meeting. The consumer price index is forecast to rise by 3.1% in November year-over-year (YoY), one notch lower than in October. Core CPI growth is expected to remain at 4%. This will be the last piece of data Jerome Powell and the Fed board members will have to digest before the Fed decision on Wednesday.
The Federal Reserve
The Federal Reserve (Fed) funds rate target range is widely expected to remain at 5.25%–5.5% for a third consecutive time. The market is now looking for clues on how soon the Fed will start cutting rates. Currently, the CME Fedwatch tool forecasts a 90% chance of a Fed rate cut by May 2024, with a 60% possibility of a cut at the March meeting.
The Westpac consumer confidence
In Australia, Westpac consumer confidence rose to 82.1 in December, with pessimists still greatly outnumbering optimists. The index has been below the neutral 100 mark since March 2022, the longest streak since the early 1990s recession. 2023 will be remembered as the second-worst calendar year for sentiment on records dating back to 1974. The National Australia Bank (NAB) business confidence fell to its lowest since the pandemic. The confidence index slid 6 points to -9, which, barring the pandemic, was the worst reading since 2012.
UK unemployment rate
UK unemployment rate remained at 4.2% in October. British wages, excluding bonuses, rose by 7.3% in the three months to the end of October compared with the same period a year earlier. The Bank of England is worried that pay growth in Britain is too high for it to bring inflation down to its 2% target.
The ZEW economic sentiment
Later this morning in Germany, ZEW economic sentiment is expected to fall to 8.8 in December from 9.8 the previous month. In November, the survey rose back up in positive territory after six months below 0, which means that out of the 350 analysts and other financial experts, a majority, although very tenuous, are now bullish on the German economy.
Rolls Royce
It may be quieter on the corporate front, but Rolls-Royce has been catching the attention of investors again to start the week. It was one of the top risers on the FTSE 100 on Monday after Citi increased its price target for the engineering company. It raised its target to 431 p from 294 p and also lifted its earnings per share (EPS) forecasts by 27% in the near term and 52% in the long term, driven by strong cash generation. It comes after UBS and Deutsche Bank analysts increased their share price target to 400 p.m. on Friday, after an upgrade by JPMorgan last week too.
Oracle
Oracle shares dropped as much as 7.8% in extended trading after forecasting quarterly revenue below estimates. Sticky inflation and high borrowing costs have forced firms to cut back on expenditure, raising concerns over demand for their cloud offerings. Oracle forecast total revenue growth to be in the range of 6%–8%, below analysts’ average estimate for growth of about 7.6%.
Cerner, the health care business Oracle acquired last year, also weighed on revenue. For its fourth quarter, Oracle adjusted earnings of $1.34 per share, marginally beating estimates. Second-quarter revenue rose 4% to $12.94 billion, below analysts’ average estimate of $13.05 billion. Excluding Cerner, revenue rose 6%.
