The strongest to the weakest of the major currencies
The AUD is the strongest and the JPY is the weakest as the NA session begins. The USD is stronger a day after the Federal Reserve temporarily paused its of interest rate increases, but also said it does not signal an end to rate hikes. The end of year forecast for rates was raised to 5.6% in 2023 from 5.1% suggesting two more rate hikes of 25 basis points on the horizon, possibly coming in the summer months. Federal Reserve Chair Jerome Powell highlighted that the July meeting will be pivotal, even though a firm decision about this meeting is yet to be made. J.P. Morgan weighed in by adding an additional hike in July in their forecast to 5.5%.
Meanwhile, in China the PBOC eased its monetary policy to bolster its economy. The central bank cut the rate on its one-year loans by 10 basis points to 2.65%, the first reduction in 10 months. This monetary easing came in the wake of a decrease in the seven-day reverse repo rate. Both these actions are in response to a slowdown in China’s economic recovery, as seen in recent data highlighting weaker domestic and global demand. J.P. Morgan cut China’s 2023 GDP forecast of 5.5% versus 5.9% previously
Next up is the ECB which is expected to continue its trend of increasing borrowing costs to combat inflation, which remains significantly above its target. Eurozone CPI inflation remains high at an annual 6.1%, three times the ECB’s 2% target. The ECB’s ongoing commitment to raising borrowing costs suggests that it will maintain a restrictive monetary policy until inflation returns to its target rate. The ECB has raised rates 7 consecutive times since July 2022, taking the main refinancing rate from 0% to 3.75%. In contrast, the Fed took rates from 0.25% to 5.25% over 10 consecutive hikes. The interest rate decision will be released at 8:15 AM ET with the press conference starting at 8:45 AM ET. The EURUSD is trading at 1.0828 ahead of the rate decision. Its 100 day MA at 1.08045 will be eyed as a key barometer today for buyers and sellers.
EURUSD 100 day MA is key barometer
Geopolitical news, a North Korean ballistic missile launch landed in Japan’s EEZ.
IN addition to the ECB rate decision, other statistics are scheduled today, including weekly jobless claims, monthly retail sales and the Philly Fed manufacturing index all scheduled at 8:30 AM and Industrial production/Capacity utilization, and business inventories at 9:15 AM and 10:00 AM. Below are the scheduled releases.
At 8:30 am:
- CAD Manufacturing Sales m/m are expected to decrease by 0.2%, compared to an increase of 0.7% last month.
- US Retail Sales m/m are expected to drop by 0.2%, compared to a rise of 0.4% in the previous period.Core Retail Sales m/m are expected to rise by 0.1%, down from 0.4% previously.
- US Empire State Manufacturing Index is expected to be -15.0, an improvement from the previous figure of -31.8.
- US weekly Unemployment Claims are expected to be 246K, down from 261K previously.
- US Philly Fed Manufacturing Index is projected to be -13.9, compared to -10.4 previously.
- US Import Prices m/m are expected to decrease by 0.5%, compared to an increase of 0.4% last month.
At 9:15 am:
- US Industrial Production m/m is expected to increase by 0.1%, down from a rise of 0.5% in the previous period.Capacity Utilization Rate is projected to remain stable at 79.7%
At 10:00 am:
- USD Business Inventories m/m are expected to increase by 0.2%, compared to a decrease of 0.1% last month.
US stocks are lower in pre-market trading. US yields are higher. Oil is higher but still below $70.
A snapshot of the markets currently shows:
- Crude oil is trading up $0.90 at $69.19
- Spot gold is trading down $-13.30 at $1928.63
- Silver is down $0.56 at $23.33
- Bitcoin is trading below $25,000 at $24,960. The low price reached $24,756 today the lowest level since March 17
In the premarket for US stocks, the major indices are trading lower in premarket trading after mixed results yesterday.
- Dow Industrial Average is trading down -56.33 points after yesterday’s -232.79 point decline
- S&P index is trading -15.2 points after yesterday’s 3.56 point rise
- NASDAQ index is trading down -95 points after yesterday’s 53.16 point rise
In the European equity markets, the major indices are mixed
- German DAX down -0.67%
- France’s CAC down -0.78%
- UK’s FTSE 100 up 0.08%
- Spain’s Ibex of 0.04%
- Italy’s FTSE MIB down -0.47% (delayed)
In the Asian Pacific market today stock indices were mostly higher/mixed:
- Japan’s Nikkei rose 1.47%
- Hang Seng index fell -0.58%
- Shanghai composite index -0.14%%
- Australia’s S&P/ASX 200 index +0.32%
In the US debt market yields higher the “day after”:
- 2-year yield 4.754% +4.7 basis points
- 5-year yield 4.047% up 3.9 basis points
- 10-year yield 3.825% up to .7 basis points
- 30-year yield 3.897% +1.7 basis points
In the European debt market, benchmark 10 year yields are higher across the board
Europe 10 year yields