What is clear is market rates have not fallen by anything near what would have been typically expected from a “Fed peak moment”. The 2-year yield ended the week at 4.75%, highest since mid-Dec and just shy of the Dec11 high near 4.77%. Next is the Nov 27 high near 4.98%. 10-year yields target Nov 27 high near 4.51% and then Nov 13 high near 4.70%.
The rise in yields at the short end reflects Fed repricing, while the rise at the long end reflects persistent inflation pressure.
Firm labour market and pops in inflation - Blockbuster payrolls -Growth remains robust - Atlanta Fed’s GDP Now model is tracking Q1 growth at 2.5% SAAR - CPI this week should show that 5% in 10 years may have higher probability - Still markets hope for rate cuts - As any RCB fan will readily acknowledge, it’s the hope that kills you.
Bowman said it was “much too soon” to think about cutting rates, and that she is concerned that inflation will stall out. Logan talked about the risk of cutting rate too soon is higher than being late. There are many Fed speakers this week and all of them to sound very similar.
ECB meeting this week with expected hold.
Germany reports IP and trade data today. To stay between 1.0791 NY low and last week's 1.0876 high - it appears likely real money demand in EUR JPY is holding up EURUSD- this flow could matter a lot - unless USD JPY goes past 152.00, EURUSD would hang on to this life thread.
China reports March money and new loan data sometime this week. CPI and PPI will be reported Thursday. CPI expected 0.4% while PPI at -2.8% - would be the deepest PPI deflation since Nov - suggests upside for CPI inflation is limited. Monetary policy is reaching the limits of what it can do in a deflationary environment and so the 5% growth target for this year will be difficult.
BoE: first cut fully priced for August, with three cuts seen in 2024. Breeden speaks today. More importantly the "trend setting" Greene speaks Thursday (Greene was the first of hawks to shift to a hold at Feb meeting & was joined by Mann and Haskel on Mar 21 meeting.1.2574 NY low to hold as 1.2675/77 38.2% Mar/Apr fall & 21 dma hold the upside.
Annual wage growth shows BOJ at best could only crawl. March machine tool orders tomorrow. Keep an eye on domestic orders, which have been underperforming foreign orders. Friday global range 150.80-151.74. Break pass 152.00 to see sharp. Rise to twin fibo at 155.20.
83.25 83.45 seems to be the newer range -cash dollar shortage becomes new normal you have to live with - discomfort for sure in this overcooked market.