FED Speakers, Speech is Silver?
Focus remains on what the Fed can do, not necessarily what the Fed will do; in contrast, other Central banks sung from a distinctly clear hymn sheet reiterating that they had the ability and intent to do what the markets want them to do. Hence, we have the Best two week stretch for USD index since mid-May 23 - shows how important relative story is for FX.
Recall that in the latest Dot Plots, one saw four cuts, nine saw three cuts, five saw two cuts, two saw one cut, and two no cuts. As such, the unchanged 2024 median boiled down to just one dove that kept their Dot at three.
Hence Fed speakers this week assume importance as they could reveal their respective dots - Bostic, Goolsbee, & Cook speak today. Waller on Wednesday & Daly and Powell on Friday.
Just watch the much-ignored Chicago Fed National Activity Index today. Headline possible at -0.34. This could be the lowest point since Oct - far away from the -0.7 threshold that signals recession.
Strong U.S. compared to weak Europe outlook weighs. German Ifo index came in a bit higher.
ECB on track to cut rates in June. Markets largely price in first cut June 6. Cuts are fully priced in for Sept 12 and Oct 17, while the market sees 75% odds of a fourth cut Dec 12. Holzmann speaks today.1.0804, 61.8% of Feb/March rise under pressure and vulnerable - break would test 1.0756, 0.786% of Feb/Mar rise.
China's FDI fell by 19.9% y/y through first two months of the year - weak confidence.
Consensus was for 7.2222 - but the fix came at 7.0996 - message from PBOC that they won't relent? - however, CNHCNY at 0.9935 -weakest since Nov 2022, showing CNY will start to trend weaker and PBOC will "permit" a weaker yuan - implications for China proxies.
Retail sales weren’t quite as bad as had been expected. Market expectations for BoE have adjusted after its dovish hold last week -market now sees 85% odds of a cut June 20 -GBPUSD targets 1.2569, 38.2% of the Oct/Mar rise- A close below would open the door to 1.2517 2024 low.
Nikkei is almost up 50% in the past 12 months - however Japanese economy is weaker in USD terms - paradox - so let’s conclude weaker the yen, stronger the Nikkei? - BoJ minutes showed discussion on measures if a positive cycle of wages and inflation is confirmed - hints of staying comfortable with weaker yen - however Kanda warns against “speculative” moves.151.94 multi decade caps.
After about six months, return of volatility- markets too numb to even take note - offshore leads make impact - 83.77 almost done - alternatively is it a case for higher dividend payout- hence fiscal close could always be higher than annual average?