FOREX: EURGBP Slides 1% Ahead of UK Labour Market Figures
Apr-14 17:56
- In a similar, albeit less volatile session to Friday, there dollar has seen significant two way price swings, culminating in broad dollar indices ticking lower on the day. Initial greenback weakness was exacerbated by a more optimistic tone for risk sentiment, assisted by the tariff reprieves for key tech products (released late on Friday). This allowed the USD index to edge back towards Friday’s cycle low of 99.01. 5-year treasury yields are 14bps lower on the session, providing an additional dollar headwind.
- However, the USD did find a base as the more constructive tone in equity markets soured through the US session. Price action was best exemplified by USDJPY, which had a punchy 207 pip range. After gapping higher at the open to levels around 144.30, USDJPY then steadily sold off, seeing the pair reach as low as 142.24 before stabilising. Despite the impressive moves for US yields on the day, the pair holds closer to 143.00 as we approach the APAC crossover.
- The best performers in G10 are NZD, GBP and NOK. NZDUSD has risen just shy of 1% Monday, and the recovery seems to have boosted by further short covering above 0.5850. Spot has returned to levels last seen in December, just below the 0.5900 mark.
- Overall, with reciprocal tariffs delayed, GBP is rallying well - underscoring GBP's correlation with risk - which looks through only marginal tweaks to monetary policy pricing. Technically, moving average studies remain in a bull mode position that highlights a dominant uptrend. An extension higher would open key resistance and the bull trigger is 1.3207, the Apr 3 high. Single currency weakness has seen EURGBP move 1% lower on Monday to 0.8600.
- For EURUSD, spot had another brief flurry above 1.14 to a 1.1425 high in early trade. However, the greenback stabilisation prompted a solid turnaround for the pair, which now sits closer to 1.1330 as markets have one eye on the ECB meeting this Thursday.
- RBA minutes, UK labour market figures and German ZEW are all scheduled on Tuesday, ahead of Canadian CPI and US Empire State Manufacturing, which highlight the North American session.
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
Mar-14 21:28
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Mar-14 21:25
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
Mar-14 21:17
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
