Last Trading Day, Still learning!
Last trading day of the quarter before a long holiday weekend should be tricky especially ahead of PCE report on Good Friday.
Take the S&P 500, for instance; no one expected a rally when low volumes of the last week were being seen as a sign of Fatigue; however, the index notched record high yesterday, capping off a strong quarter, of 10%. Identifying specific reason is tough - akin to finding a needle in a haystack. A strong 7-year auction might be one reason.
Across many if not most of the economies a general macro trend is perceptible- the economic data clouds a languishing private sector with a massive rise in public debt weakening employment embellished by labour shortage amidst unheard waves of immigration.
US exceptionalism narrative -stronger growth than peers (on the back of this massive fiscal push) & the higher rates to fund the hole – are set to continue over both short- and medium-term -path of the least resistance for USD continues to lead higher - shallow dips rapidly bought. USD's quick recovery post-March FOMC underscores the impact of this narrative.
Waller maintains his stance of 'no rush' to cut rates, citing persistent inflation data and Bostic echoes a similar sentiment.
EUR/USD losing streak on sustained barrage of dovish ECB speak. Stoumaras said that there is a growing consensus for a June rate cut, while Muller endorsed it. Philip Lane said that wage inflation on track” to return to normal levels. German Retail Sales today. Below 1.0800, objective at 1.0695.
It is a matter of time before PBoC pulls out a controversial monetary policy tool that it has not used in more than two decades, following newly publicised instructions from Xi Jinping. So, stay prepared for CNY weakness.
Markets expect BoE to cut rates sooner as Bailey said market expectations for rate cuts this year are not "unreasonable". Economy appears to have found a bottom as UK car output 14.6% in February thanks to strong domestic demand. But FX is a relative story - so GBP USD as well as EURGBP tend to stay weaker. GBPUSD targets 1.2569- close below for 1.2517.
Markets are not overly concerned about this intervention rhetoric. Makes better sense to watch the cherry trees about to flower in Japan. USDJPY 152.00 break could see twin Fibos 155.20.
Broadly held 83.30 83.45 zone since we wrote last - nothing to suggest any deviation from this - markets slowly learning to " trade" - you get to hear the inexplicable phrase "dollar shortage" too often.