Monday ended up being a day of general consolidation in the FX markets, with risk sentiment mildly underpinned by better than expected German IFO, easing recession fears in the process. The Business Climate improved to 99.6 in March, up from 98.7 and beat expectation of 98.5, while the Current Assessment rose 0.2 to 103.8, beating the expectation of 102.9 and the Expectations gauge also rose to 95.6, versus consensus of 94.0.
The US$ is generally mildly softer in what has been a fairly steady session, not helped by lower US yields although the DXY is unchanged at 96.55. The US10Y fell to a session low of 2.375%, but ended the day back at just above 2.4%. The main action was in the stock markets where the US indices also finished more or less unchanged although it was a fairly wild ride as traders jockey for position on the back of the outlook for lower global growth. The Fed’s Evans conceded that while the US economy is performing well, the yield curve inversions seen last week, and again today, are a concern, with a 25bp rate cut now fully priced in before year end, and 10-year Treasury yields more than 10bp below the top of the Fed funds range.
The Brexit mess continues, and UK PM Theresa May today acknowledged that her plan is unlikely to be passed at the 3rd time of asking, so debate continues as to what the next tactic will be. The EU said in a statement that it has completed the preparations for a no-deal Brexit on April 12. It also noted that it is “increasingly likely” that UK will leave EU without a deal. Who knows?
In other markets, WTI is unchanged despite the fact that recession worries seem to be growing, while Gold headed a little higher, possibly assisted by the need to diversify in the face of; Brexit uncertainties, concerns over lower US/Global economic growth, an overly cautious Fed and uncertainties on the China trade negotiations.
Looking ahead, Tuesday will begin with the NZ Trade Balance for February (exp -6.13 bio) and speeches from the RBA’s Ellis and also from the Fed’s Rosengren. Europe will be this, with just the German Consumer Confidence and then the US will have a fair bit of housing data, including the Building Permits (exp -0.6%mm), Housing Starts (exp -28.3%mm), Case Shiller House Price Index (exp +4%), House Price Index (exp +0.3%) as well as the Richmond Fed Mfg Index (exp 12) and the weekly API Weekly Crude Oil Stock Inventory.
Economic data highlights will include:
Tue: Speech; RBA’s Ellis, Speech; Fed’s Rosengren, NZ Trade Balance, German Consumer Confidence, US Housing Starts, Building Permits, Case Shiller House Price Index, House Price Index, Consumer Confidence, Richmond Fed Mfg Index, API Weekly Crude Oil Stock Inventory
Market moves, in brief:
FX: DXY 96.52 (-0.02%)
Bonds: US10Y; 2.414% (-1.25%), German 10Y; -0.028%(-27.73%), UK 10Y; 0.988% (-2.55%), Australian 10Y; 1.791% (-2.90%), NZ 10Y; 1.910% (-4.02 %), China 10Y; 3.144% (-0.55%)
Stock Indices: DJI; -0.01%, S+P; -0.08%, NASDAQ; -0.16%, EUStoxx50; 0.00%, FTSE100; -0.42%, Shanghai Composite; -1.97%,
Metals: Gold 1322 oz (0.66%), Silver 15.54 oz (0.65%), Copper 2.855 lb (0.25%), Iron Ore 85.82 per tonne (-0.08%),
Oil: WTI 58.96 pb (+0.19%)
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