The Morning Hark - 21 May 2024
Today’s focus...Feders prepare us for the new dot plot. To The Moon for Crypto, for now at least!
Overnight Highlights
Prices are at 6.30 BST/1.30 EST, with changes reflecting movement from midnight GMT
Oil - Oil trading down smalls in Asia with Brent and Crude July futures currently at 83.20 and 78.80. Little new news.
EQ - Asian equity markets little changed overnight with the Hang Seng and Nikkei futures trading at 19,290 and 39,000.
The US indicies remain unchanged in Asia, with the S&P and Nasdaq futures now at 5335 and 18,755 respectively.
Gold - Gold off close to one percent in Asia with the June futures trading currently at 2420 as gold takes a breath after its recent rally to new highs.
FI - US yields unchanged overnight with currently the US2y futures trading at 4.84% whilst the US10y futures yield at 4.44%.
European yields started the week a touch firmer with the German 10y closing at 2.54% and the Italian 10y yield at 3.82%.
UK gilt 10y similarly at 4.18%.
FX - The USD flat overnight with the USD Index currently at 104.63. The majors now trading at; JPY, EUR and GBP 156.50, 1.0860 and 1.2710 respectively.
Today’s major FX option expiries sees in the EUR; €1bn each at 1.0840 and 1.0875. In USDCAD for CPI day we have $1bn at 1.3645 and at 1.37.
Others - Bitcoin and Ethereum flying on the ETF chatter. TO THE MOON and all that! The pair currently at 70,900 and 3645 respectively.
Lot of Ethereum ETF approval chatter yesterday with Bloomberg’s ETF expert raising his view for an ETF approval. Later stories emerged that the SEC had asked the exchanges to update their filings in preparation for an approval. Seem to remember we had similar stories re the exchanges with BTC but let’s see. Enjoy the ride.
Macro Themes At Play
Central Bank Speakers
Seems a concerted effort from the Feders to express the higher for longer view yesterday, and no doubt more to come today, as they prepare the market for a more hawkish dot plot at next month’s meeting.
Fed’s Bostic thinks that inflation will fall this year but the first part of the year has been bumpy. However this is still a ways to go. He is open to all possibilities as there are many economic scenarios but believes that the Fed’s current policy rate is restrictive.
Barr wanted the Fed to allow the tight policy to have further time to continue to do its work. Q1 inflation was disappointing and did not provide the confidence needed to ease rates.
Jefferson pointed to the resilience in the jobs market providing space for the Fed to maintain the focus on lowering inflation. He said it was too early to say April CPI was indicative of the future but it was a good sign. Fed staffers estimate Core PCE at 2.75% YoY.
He sees consumer spending growth slowing this year.
Daly was not confident that inflation was coming down sustainably to 2% and hence there is no urgency to adjust rates.
Mester admitted that inflation progress stalled in the first three months of the year but April’s print was good news. However it is too soon to tell what path inflation is on but risks are to the upside. She felt that three rate cuts this year, her previous position, is not appropriate. The Fed can hold, or raise rates, if inflation stalls out or reverses. Equally if there is an unforeseen deterioration of the economy we can cut.
BoE’s Broadbent claimed that it was possible the bank rate could be cut in the summer but in general rates will be less restrictive at some point.
The experience of the last few years has made the MPC wary about cutting rates although the signs of inflation pressures easing is reassuring.
The Day Ahead
RBA Meeting Minutes offered little new although they did consider a rate hike but judged that unchanged had stronger merits. Inflation risks increased and recent data raised the risk that inflation stays above target. Changes to cash rate difficult to rule in or out.
Canadian Inflation Report for April the only data point on the day but we do have a serious raft of central bank speakers.
Early doors tomorrow Japan Reuters Tankan for May as well as the April Trade Balance. We also get the RBNZ Rate Decision and press conference and as we go to press the UK Inflation Report for April as we go to press tomorrow.
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Main Highlights Ahead
All times in BST (EST+5 / CET-1 / JST-9)
The main highlights for the day ahead ahead in terms of data and speakers:
Tuesday
Canada Inflation Rate MoM Apr consensus 0.5% vs previous 0.6% (13.30 BST)
Canada Inflation Rate YoY Apr consensus 2.7% vs previous 2.9% (13.30 BST)
Canada Core Inflation Rate MoM Apr consensus % vs previous 0.5% (13.30 BST)
Canada Core Inflation Rate YoY Apr consensus % vs previous 2% (13.30 BST)
Canada CPI Median YoY Apr consensus 2.7% vs previous 2.8% (13.30 BST)
Canada CPI Trimmed-Mean YoY Apr consensus 2.9% vs previous 3.1% (13.30 BST)
Fed Speakers
Barkin (14.00 BST)
Waller (14.00 BST)
Williams (14.05 BST)
Bostic (14.10 BST)
Barr (16.45 BST)
Mester (24.00 BST)
Bostic (24.00 BST)
Collins (24.00 BST)
ECB Speakers
Lagarde (09.00 BST)
BoE Speakers
Kroszner (09.20 BST)
Bailey (18.00 BST)
Early Wednesday
Japan Reuters Tankan Index May consensus vs previous 9 (00.00 BST)
Japan Balance of Trade Apr consensus JPY-339.5bn vs previous JPY366.5bn (00.50 BST)
Japan Exports YoY Apr consensus 11.1% vs previous 7.3% (00.50 BST)
Japan Imports YoY Apr consensus -2.2% vs previous -4.9% (00.50 BST)
RBNZ Interest Rate Decision rates to be held steady at 5.5% (03.00 BST)
RBNZ Press Conference (04.00 BST)
UK Inflation Rate MoM Apr consensus 0.2% vs previous 0.6% (07.00 BST)
UK Inflation Rate YoY Apr consensus 2.1% vs previous 3.2% (07.00 BST)
UK Core Inflation Rate MoM Apr consensus 0.7% vs previous 0.6% (07.00 BST)
UK Core Inflation Rate YoY Apr consensus 3.6% vs previous 4.2% (07.00 BST)
Good luck.
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