• Main
  • Analytics
  • Market Reviews
  • Weekly Focus: Moody’s Sees U.S. Rating Down amid Lower Inflation

Weekly Focus: Moody’s Sees U.S. Rating Down amid Lower Inflation

Investors are bewildered and prefer not to make harsh moves as October inflation report will be delivered on Tuesday. More macroeconomic data from the United States, China, the United Kingdom, Eurozone to follow before the cornerstone meeting of U.S. President Joe Biden and China’s leader Xi Jinping.

Moody’s rating agency has put its sovereign rating for the United States under review with a negative outlook. Such move could force borrowing cost to rise again with stock indexes to go down. But, there were no sell-offs in the beginning of the week. U.S. 10-year Treasuries yields are close to the 4.65% mark, where they were last Friday. The S&P 500 broad market index is solid around 4409 points. Even the Greenback is more or less unchanged. 

Investors are waiting for October inflation report to be published on Tuesday to make their bets. Consumer prices are expected to slow down to 3.3% YoY from 3.7% YoY in September, and to 0.1% MoM from 0.4%. If these estimated would become a reality interest rates will go down together with the U.S. Dollar, while stock indexes would rise. So, it is wise to wait for the report first, as nobody could guarantee there would be no surprises. Core CPI may remain at 4.1% YoY and at 0.3% on the m monthly basis. This will mean that a slowdown in inflation was achieved only due to the lower energy prices. Then the warning from the Federal Reserve (Fed) Chairman Jerome Powell would become foreseeing, when he spoke about illusive inflation data. So, wait and see tactic is justified now, at least until Wednesday.

Another portion of macroeconomic data from China, the United States and the United Kingdom will be released on November 15. The meeting of Joe Biden and Xi Jinping will likely offset this news. Rising political tensions between two nations makes this meeting very important. However, true results of this meeting could be hidden from the public. So, this meeting may likely flag no volatility limits for the rest of the week. This is when investors could make their real bets considering all incoming information, including Moody’s rating action.

Middle East situation is another issue that would have separate impact at the end of the week. Escalation or de-escalation in Gaza strip would highlight real results of the U.S. China talks. So, the development of the conflict should not be missed. 

Technically, the , the S&P 500 index aggressive upside formation with a primary target at 4500-4600 points has not changed. It had received another push to 4420 points. If there will be no more impulses to push the index up by Wednesday the aggressive upside formation will be replaced by a moderate upside formation with targets at 4450-4550 points. 

Oil market is unchanged as there are no major development in the Israeli-Palestinian conflict. Military actions are still in a hot phase and may be expanded to the full-scale regional war at any moment. Oil prices went up a little after Saudi Arabia energy minister blamed speculators for oil prices plunge. If Brent crude prices would successfully retest the support at $83.00 they may fall to $75.00 per barrel. In case of a rebound, they are likely to recover to $90.00-94.00 per barrel.

Gold prices are moving inside the mid-term upside formation with targets at $2000-2100 per troy ounce that have already been met. Prices unsuccessfully tested the resistance at $2000-2020 per ounce, and rolled back to the support at $1910-1930. Their recovery is the likely scenario by mid-December. Afterwards they may continue to drop towards $1800 per ounce.

The Greenback edged higher removing the oversold tension. The Dollar is seen to continue down towards 1.08500-1.09500 against the Euro. The correction could be extended by Tuesday, when the U.S. inflation data for October will be released. A huge wave of Dollar strengthening to the parity with the single currency may follow.