The strongest to weakest of the major currencies
The GBP is the strongest of major currencies while the JPY is the weakest. The USD is mostly higher but mostly gains can’t be attributed to the rise in the USDJPY.
The JPY is sharply lower after a Reuters article further debunked the idea that the BOJ was closer to tightening policy.The article highlighted a significant concern among the Bank of Japan (BOJ) policymakers regarding recent weakness in consumption. This issue has emerged as a new factor that may influence the timing of the BOJ’s exit from negative interest rates. The article explained that the market’s interpretation of BOJ Governor Kazuo Ueda’s remarks, made in response to a question about the challenges he has faced since his appointment in April, led to expectations of an imminent policy shift. However, these remarks were reportedly taken out of context, as there was no intention to signal an imminent policy change.
Despite inflation running above its 2% target for more than a year, and rising prospects for sustained wage increases, the timing for exiting negative interest rates remains uncertain due to Japan’s fragile economy. The BOJ is particularly concerned about recent signs of weak consumption.
IN other weekend news, economic data was highlighted by a significant downturn in China’s Consumer Price Index (CPI), with a year-on-year decrease of 0.5%, notably below the expected 0.1% drop. This decline was more pronounced than the previous -0.2% and contrasts with the month-on-month figures, which also fell by 0.5% against an anticipated 0.1% decrease. This economic trend suggests ample room for China to ease its monetary policy, highlighting the sluggishness of its post-COVID economy. Simultaneously, the robust demand for iron ore presents a paradox, particularly given the apparent slowdown in construction activities. This scenario adds to the enigma that often surrounds China’s economic dynamics. Additionally, the Producer Price Index (PPI) also showed a more significant than expected decline, recording a 3.0% year-on-year fall compared to the predicted 2.8%, marking a steeper drop from the previous 2.6% year-on-year decline.
The US treasury will auction off 3 and 10 year coupon notes today and 30-year bonds tomorrow. That is ahead of what is normal (Tuesday, Wednesday and Thursday auctions). It is prompted by the FOMC rate decision on Wednesday. The Treasury does not want to conduct auctions just ahead of a key rate decision.
The FOMC is expected to keep rates unchanged when they announce their decision on Wednesday. Focus will be on clues from the statement, the economic projections including the dot plot of rate expectations and Fed Chair Powell’s comments during his normal press conference. Ahead of the rate decision, the US CPI will be released on Tuesday with expectations of 0.3% and 3.1% YoY (down from 3.2%).
The SNB, BOE and ECB will also announce their rate decision this week (on Thursday). No change is expected for each with focus on the expectations for rates going forward.
A snapshot of the markets to kickstart the North American session shows:
- Crude oil is trading down $0.47 or -0.68% at $70.76 . At this time Friday, the price was at $70.74
- Spot gold is trading down $9.20 or -0.46% at $1995 . At this time Friday, the price is at $2027.45
- Spot silver is trading down -$0.06 or -0.28% at $22.92. At this time Friday, the price was at $23.74
- Bitcoin is trading at $42,287. At this time Friday, the price was trading at $43,547
In the US stock market, the major indices are implying a mixed opening after closing higher across-the-board on Friday. The major indices all closed last week higher for the six consecutive week gain:
- Dow Industrial Average futures are implying a gain of 18 3.points. On Friday the Dow Industrial Average rose 130.49 points or 0.36%. Last week, the index rose 0.01%.
- S&P index futures are implying a gain of 0.13 points. On Friday the S&P index rose 18.78 points or 0.41%. Last week, the index is down -0.20%.
- NASDAQ index futures are implying a decline of -17.94 points. On Friday the Nasdaq Index rose 63.98 points or 0.45%. Last week, the index is up 0.69%
In the European equity markets, the major indices are trading mixed.
- German DAX, +0.01%
- France’s CAC, +0.28%
- UK’s FTSE 100, -0.52%
- Spain’s Ibex, -0.19%
- Italy’s FTSE MIB, unchanged (10 minute delay).
In the Asia Pacific market, major indices were mixed.
- Japan’s Nikkei index, was 1.50%.
- China’s Shanghai Composite Index, was 0.74%
- Hong Kong’s Hang Seng index, -0.1%.
- Australia’s S&P/ASX index, was 0.06%.
In the US debt market, yields are trading higher:
- US 2Y T-NOTE: 4.758%, +3.1 basis points. At this time yesterday, the yield was at 4.630
- US 5Y T-NOTE: 4.284%, +3.0 basis points. At this time yesterday, the yield was at 4.174%
- US 10Y T-NOTE: 4.273%, +2.9 basis points. At this time yesterday, the yield was at 4.179%
- US 30Y BOND: 4.352% was 2.7 basis points. At this time yesterday, the yield was at 4.277%
- 2 – 10-year spread is trading at -48.4 basis points. At this time yesterday, the spread was at -45.1 basis points
- 2 – 30 year spread is trading at -40.6 basis points. At this time yesterday, the spread was at -35.7 basis points
In the European debt market, benchmark 10-year yields are trading mostly higher: