Eclipse on the rate Cuts!
Market sentiment reflects a growing sense of widespread geopolitical tension with oil prices surging on potential threat of supply disruption.
Besides Kashkari's "no rate cuts in 2024" stance, just think in case the double-digit pay growth for job changers in ADP is even remotely trend accurate & gets reflected in Average Hourly Earnings today particularly with headline at 200k, doves would have to roll over their rate cut bets into CY 2025.
U.S. exports rose $5.8 billion in Feb while imports shot $7.1 billion higher - rising imports kept trade deficit at $68.9 billion -domestic goods demand is normalizing after a weak year for capital expenditures and durable good consumption.
ECB minutes strike a fine balance between sounding hawkishly concerned & at the same time, preparing for a first rate cut.
German Industrial Orders tumbled at an annual rate of 10.6% (previous 6.2%). Still would bet on EUR USD closing below 1.0824 to test 1.0695.
Since last year, electric vehicles, lithium batteries and solar cells have become China’s new export pillars, with their value exceeding US$138 billion. Yellen is in China to persuade China from over producing - anyway exchange rate out of the picture- PBOC has so far prioritised the stability of the yuan over easing. USD/CNH down slightly to 7.2456 as Hong Kong mkt reopens.
Its more about global dynamics than UK economy - now the markets have become almost overconfident on UK economy- what a turnaround in sentiment in three months although macros have not improved to that extent - GBPUSD: 1.2501 Dec base, 1.2517 2024 low, and 1.2536 Feb 14 base are strong. Can't break above 1.2675.
Nikkei reached ATH at 41087.75 on March 22 surpassing 1990 high at 38957. With price currently trading back below 1990 high, there are alarm bells. The third estimate of 'Shunto' wage negotiations by Rengo is expected to reveal a significant wage increase, with second estimate already a 5.25% hike. Inflation is set to be persistent & BOJ to stay pat. So, yen weakness - awaiting a 152 breakout.
Oil rally or this intensity of the Geopolitical tension does not make any impact as markets tend to see them as short-term aberrations. For now capped at 83.45.