UK retail sales fell by 1% in December, excluding fuel by 1.1%. The data surprised analysts who had, on average, expected an increase of 0.5% last month. Sales were 5.8% lower than in the same month a year earlier, when they were 0.7% below December 2020. The retail sales index has been on a downward trend since April 2021 and, in that time, has returned to pre-pandemic levels, breaking a natural multi-year upward trend with such a sharp decline that Britain did not even see during the Great Recession. Other reports from the Office for National Statistics also point to a steady decline in industrial production, although it is smoother now than in some episodes from 2007 to 2011. Surprisingly, the labour market remains strong. A similar picture can be seen in the USA, for which we received news earlier this week. In both countries, central bankers are signalling further rate hikes and preparing for a "mild recession". This similarity in macroeconomic conditions makes the GBPUSD dynamics a tug-of-war. However, there are more downside risks in the pair now, given how it has stalled on the approach to the highs of December and the pressure on the stock indices with which the pound has a direct correlation. GBPUSD may correct into the 1.20-1.21 range before the end of the month. This would return the pound to a test of its 200-day average, where it could either get support from long-term buyers or return to the downtrend.

As 2023 gets underway, so do the central bank meetings and the Bank of Canada will be the next after the BoJ to announce its first policy decision of the year. Meanwhile, investors will be nervously awaiting the first PMI readings of 2023 next week as they juggle to reach a consensus about the recessionary risks. In the United States, there will additionally be the advance GDP estimates for the final quarter of 2022, as well as PCE inflation data. The latest CPI numbers will be at the forefront too in Australia and New Zealand.  BoC to ponder one last rate hike After having spent much of the last year front loading rate hikes, many central banks are now nearing the end of their tightening cycle and this theme is likely to dominate at least the first half of 2023. The Bank of Canada could take the lead in pausing rate hikes when it meets on Wednesday, but in all probability, it will raise its overnight rate by 25 basis points to 4.50% in one final tightening round. Inflation in Canada peaked back in June but then stubbornly hovered slightly below 7%. There was better news from the December data as the retreat in CPI gathered pace, sliding to 6.3% y/y. However, underlying measures of inflation haven’t budged much in the last few months. What’s more, employment surged in December, making a pause appear somewhat questionable. Markets have assigned about a 60% probability of a 25-bps rate rise, with the remaining bets placed on no change. This gives the Canadian dollar some scope for gains should the BoC lift rates in line with expectations. However, if the Bank maintains the same language as last time that it “will be considering whether the policy interest rate needs to rise further”, the loonie is more likely to slip after the decision. US data could be a mixed bag for the dollar Just south of the border, the Fed is far from done with rate hikes and investors are getting more and more jittery about an impending recession. Inflation in America is well and truly on the way down, but so is pretty much everything else as cracks are appearing across the economy. The hot labour market is fast becoming the sole bright spot. But with payrolls being a lagging indicator, markets are increasingly out of lockstep with the Fed as they are not convinced it will be able to stick to its rate hike path where the terminal rate is somewhere above 5%. The US dollar has been a big casualty of this divergence and next week’s releases could potentially stir even more confusion. Data on durable goods orders and the initial estimate of Q4 GDP are expected to be upbeat, with the former seen rising by 2.5% m/m in December and the latter by an annualized 2.8% q/q. Both are due on Thursday. However, the flash S&P Global PMI readings out on Tuesday could point to another contraction in business activity in the early parts of January, while Friday’s personal income and spending numbers for December could be soft again. More importantly, the core PCE price index – the Fed’s preferred inflation gauge – could make further progress towards the 2% target. There could be support for the dollar if the US indicators overall aren’t as dire as some of the more recent ones, such as the ISM non-manufacturing PMI and retail sales. But for Wall Street, traders might shrug off the data and focus on the Q4 earnings season as tech favourites Microsoft and Tesla will be among the many reporting their latest financial results. Not as bad as feared for the euro area In Europe, the flash PMIs will be taking a more prominent role when released on Tuesday. Although the PMI numbers since the summer have been mostly knocking the euro down, lately, the picture from the surveys has been improving and this could be repeated in January. The manufacturing PMI is forecast to edge up from 47.8 to 48.5, while the services sector is expected to return to growth, with the PMI increasing to 50.2 from 49.8. The current shift in the economic backdrops on either side of the Atlantic whereby there are growing signs that any recession in Europe will be a mild one but that the much-hoped soft landing in the US might not be possible after all has been a game changer for the euro. The single currency is trying to establish a foothold above the $1.08 level and its prospects for 2023 look promising as the European Central Bank has reiterated its pledge for several more 50-bps rate hikes in the coming meetings. If the PMIs provide further evidence that the worst is over for the continent from last year’s energy crisis, the...

In this Trading Opportunities Webinar, Neerav Yadav (Author of "Think with the Markets") has discussed charts of Forex, Commodities, Indices. All discussions are based on Advanced Elliott Wave, with detailed Wave counts as well standard Supply and Demand analysis.

US Q4 GDP – 26/01 – having started the first half of last year with two successive quarters of negative GDP growth, the US economy saw a return to positive GDP growth in Q3, of 3.2%, after a late upgrade from, 2.9% at the end of last year, with personal consumption coming in at 2.3%, a decent improvement on the 2% seen in Q2, and a significant improvement on the first iteration which only came in at 1.4%. The upward revision higher came about as a result of a rebound in consumer spending, as well as higher government spending. As we look towards this week's first iteration of Q4 GDP is seems quite likely that we'll see a slowdown from the strong performance in Q3. Expectations are for a modest slide to 2.5%, although with signs in recent months that consumer spending is slowing you might think that there could be considerable downside risks to that estimate.    US Personal Spending/PCE (Dec) – 27/01 – the last 2 months have seen a sizeable slowdown in US personal spending. At the beginning of the quarter, in October, we saw a very solid rise of 0.9%, however November saw that fall sharply to 0.1%. That would suggest a rising caution amongst US consumers, which when combined with US banks setting aside hefty loan loss provisions as we head into 2023, that consumers are becoming more frugal with their spending. With the Federal Reserve due to meet next week the December Core PCE numbers could undermine the narrative for a step down to a 25bps rate hike at the next Fed meeting. With the core deflator now at 4.7% and its lowest level in 12 months, a further decline to 4.4% and the lowest level since October 2021, could rubber stamp what might come next week. What markets won't want to see is a tick back towards 5%, and the peaks we saw 11 months ago.    Bank of Canada decision – 25/01 – it was back in October that the Bank of Canada set the cat amongst the pigeons when it raised rates by a less than expected 50bps to 3.75%, in a move that suggests that central banks were starting to wake up to the possibility that too aggressive rate rises could do more harm than good. They then followed that with another 50bps rate rise in December, to 4.25%, as concern grew that raising rates too high could create problems in the housing market. With this week's decision coming a week before a similar decision by the Federal Reserve a lot of people are looking at the Bank of Canada for a steer in terms of whether we could see a step down from the Fed. It is widely anticipated that the BoC will announce another step down to 25bps, after headline inflation fell back to 6.4% from 6.8% in December. Median core prices however have remained sticky, remaining at 5% in November and the highs of the year.                  Manufacturing and services flash PMIs (Jan) – 24/01 – in the past few months we've seen evidence that due to the sharp declines in energy prices that economic activity is starting to pick up. In Germany manufacturing PMI fell to 45.1 in October, but has recovered since then, albeit it is still very much in contraction territory. Services has seen a similar pattern, dropping to two-year lows of 45, before showing small signs of a recovery. In France, we've seen a similar pattern in manufacturing, although services have been more resilient due to the energy price subsides provided by the French government to cushion French households from the worst effects of higher prices. In the UK, manufacturing has struggled over the past 3 months and looks set to continue to do so, while services have been slightly more resilient. As we head into 2023 the challenges for business will be whether we see new investment, and a pick-up in economic activity, after the rising pessimism seen at the end of last year.    Associated British Foods Q1 23 – 24/01 – for most of last year ABF shares couldn't catch a break, falling to 10-year lows back in September last year. This weakness came despite a business that was performing well despite challenging economic conditions. Since those lows the shares have rebounded strongly. When the retailer reported its full year numbers back in November, annual revenues rose by 22%, to just shy of £17bn, while adjusted profit before tax rose 49% to £1.35bn. The Primark business, which accounts for just under half the sales, saw a 38% rise in revenues to £7.7bn, while also seeing an improvement in adjusted operating profits and margins, although rising energy prices and input costs are proving to be challenging. For the new fiscal year Primark's adjusted operating margin...

Dollar Index looks weak towards 101.50-101 while Euro can rise to 1.09/10 within the 1.07-1.10 range. Aussie has declined and can test the lower end of the 0.68/6850-0.71 region while Pound has risen and has scope to test 1.24/25 before a decline is seen. EURJPY is attempting to rise slowly but USDJPY looks ranged for now. USDCNY needs to break above 6.80 or higher to turn bullish while USDRUB looks ranged within 66-70. USDINR may be ranged within 81.20-81.60 for now while EURINR can slowly rise to 88.50-89. The US Treasury and the German yields have bounced. Both will need to get a strong follow-through rise from here to avoid a fall back and a further fall. It is a wait and watch situation. The 10Yr and 5Yr GoI continues to remain mixed and can remain sideways. Dow continues to fall. DAX has declined sharply but may get support at 14850-14800 from where a possible rise back can be seen. Nikkei has inched down further but the support near 26100-26050 is likely to limited the downside. Shanghai has risen sharply, breaking above the upper end of the 3250-3200 range. Nifty has declined but is managing to hold above its immediate support. Brent and WTI have risen back sharply but needs a strong break above $87.50 and $82.50 to target the next key resistance on the upside. Gold has risen back sharply and is attempting to break above the resistance at 1930. Copper continues to trade within 4.3-4.1 range. Silver has rebounded sharply and may rise towards the upper end of the 23-25 range. Visit KSHITIJ official site to download the full analysis

Retail sales and industrial production fell more than expected. With a recession on the horizon, silver may fly if the Fed stops the hikes! It is closer and closer… wrapping itself slowly but decisively around the economy like an anaconda around its prey. I mean a recession, of course. The recent bunch of economic data leaves no doubt that the U.S. economy is losing momentum. Retail sales fell 1.1% in December, following a downwardly revised drop of 1% in November. The decline was larger than expected, and it was the biggest decrease in 12 months. The fall is really disturbing as we are talking about the holiday shopping period. However, the sales were reduced in part because of the decline in prices. Industrial production also surprised negatively, falling 0.7% in December. It followed a 0.6% decrease in November and was larger than expected. The decline was driven mainly by manufacturing output which fell 1.3% in December and moved down 2.5% at an annual rate in the fourth quarter. Higher interest rates and reduced purchasing power by inflation hurt demand for goods. The latest edition of the Beige Book also doesn’t inspire optimism. According to the report, five of the Fed’s districts reported slight or modest increases in overall economic activity over the last several weeks, while six noted no change or slight declines from the previous reporting period, and one cited a significant decline. Will Softer Data Prompt a More Dovish Fed? The disinflationary pressure and widespread signs of weakening demand could encourage the Fed to further decelerate the pace of its interest rate hikes. This is what Patrick Harker, Philadelphia Fed President, suggested this week, saying that “he‘s ready for the U.S. central bank to move to a slower pace of interest rate rises amid some signs that hot inflation is cooling off”. Dallas Fed President Lorie Logan expressed a similar view in her first major policy speech at the new post: If you’re on a road trip and you encounter foggy weather or a dangerous highway, it’s a good idea to slow down. Likewise if you’re a policymaker in today’s complex economic and financial environment That’s why I supported the (Fed’s) decision last month to reduce the pace of rate increases. And the same considerations suggest slowing the pace further at the upcoming meeting Futures traders also bet on such a scenario, as they see a more than 95% chance of a 25 basis point hike in two weeks, according to the CME FedWatch Tool. The slowdown in hikes would be fundamentally positive for silver prices. Implications for Silver What does it all mean for the silver (and gold) outlook for 2023? Well, the falling inflation rate and weakening economic momentum imply that the Fed may become less aggressive in raising interest rates. Any signs of a more dovish monetary policy should be positive for silver and support the upward trend that started in November 2022 (see the chart below, courtesy of silverpriceforecast.com). What’s more, as the U.S. economy is losing momentum, recession worries should intensify, which could also strengthen the safe-haven demand for the precious metals. Counterintuitively, the price of silver declined yesterday. But it could have been a normal correction (please remember that silver is partially an industrial metal) or a reaction to some hawkish comments of the Fed’s Bullard and Mester about the need to move the federal funds rate above 5%. But these two hawks are not the voting members this year. Thus, don’t pay attention to the market noise, but focus on the fundamental trends. And they are clear: the economy is slowing down, which will prompt the Fed to decelerate and later to even stop the rate hikes.