Revaluation of Fed's rate path continues to hamper the greenback – FXStreet

Credit: Original article can be found here



Headline CPI YoY continues downward momentum, dropping for Finland and Sweden compared to month prior. Spain, France and Poland Mar Final CPI readings unrevised or little changed.

USD remains weak in wake of US Jobless Claims and cooler PPI as market bets on possible Fed rate cuts on horizon. Growth stocks took a bid in US session yesterday; Asia and European equities continued positive risk on move.

– The meat of Q1 earnings season begins with banks results in premarket from JPM, PNC, BLK, WFC, C; Focus to be on forward guidance and any color in connection to recent banking instability.

– French luxury retailer Hermes provided Q1 update and noted April trends continue to be favorable in US with store traffic continues to rise.

– Asia closed mostly higher with only NZX50 in red at -0.4%. EU indices are +0.1-0.4%. US futures are -0.2%. Gold -0.3%, DXY -0.1%; Commodity: Brent 0.0%, WTI +0.1%, TTF -2.0%; Crypto: BTC +1.7%, ETH +7.3%.


– Singapore Q1 Advance GDP Q/Q: -0.7% v -0.1%e; Y/Y: 0.1% v 0.6%e.

– Singapore Monetary Authority (MAS) Bi-Annual Monetary Policy Statement kept its policy steady (1st pause in 6 decisions in the current tightening cycle).

– Japan BOJ Gov Ueda stated that inflation expected to fall below 2% toward middle of this year. Told G-20 that BOJ would maintain monetary easing for CPI goal.

– PBOC Gov Yi Gang reiterated that expected 2023 domestic GDP growth around 5%. Domestic economy is rebounding, stabilizing.

– China PBoc Gov Yi Gang met with US Fed’s Powell during the IMF and World Bank meetings to discuss China/US relationship and economic and financial situation.

– Bank of Korea (BOK) Gov Rhee stated that was not concerned about specific USD/KRW rate. Monetary policy was in a restrictive area.

– New Zealand Fin Min Robertson stated that if the country entered a recession it would be shallow and would emerge quickly from it.


– ECB’s Nagel (Germany) reiterated stance that the tightening cycle to continue; Core inflation was still very high.

– ECB’s Holzmann (Austria) reiterated view that a half-point hike was in ballpark for May.

– ECB’s Vasle (Slovenia) stressed that underlying inflation was moving in wrong direction; Considering 25 or 50 bps hikes for the May meeting. Not wise to decide now on size of next rate hike. Core CPI turnaround could lead to smaller May hike.

– ECB’s Kazaks (Slovenia) stated that interest rates would need to go up more to tame inflation, risk of recession was non-trivial. Key issue was still high inflation and would not exclude possibility of 50bp hike in May.

– UK Chancellor of the Exchequer (Fin Min) Hunt stated that the latest GDP data showed there was no room for complacency. To ‘look at’ raising deposit guarantees in wake of SVB.


– Fed released factors affecting reserve balances (H.4.1): Discount window borrowing decline to $67.6B v $69.7B w/w; Banks had borrowed $71.8 v $79B w/w from new BTFP.

Speakers/fixed income/fx/commodities/erratum


Indices [Stoxx600 +0.37% at 465.92, FTSE +0.28% at 7,865.40, DAX +0.29% at 15,775.85, CAC-40 +0.24% at 7,498.96, IBEX-35 +0.21% at 9,329.72, FTSE MIB +0.36% at 27,725.00, SMI +0.42% at 11,305.80, S&P 500 Futures -0.15%].

Market focal points/key themes: European indices open generally higher and maintained the positive tone through the first hours of trading; Cyprus, Greece closed for holidays; sectors trending in the green include real estate and industrials; lagging sectors include financials and energy; oil & gas subsector weighed on by retracement in crude prices from recent highs; unofficial start of earnings season; Shares of French luxury retailer Hermes trade higher in Paris following its Q1 update and comment that April trends continue to be favorable in US with store traffic continues to rise; Blackstone acquires Industrials REIT; Newmont and Newcrest enter exclusivity deal; earnings expected in the upcoming US session include JPMorgan, Wells Fargo, UnitedHealth and Citigroup.


Consumer discretionary: Hermes [RMS.FR] +1.5% (reports Q1, beats estimates; Notes April trends positive in US), Superdry [SDRY.UK] -16.0% (FY23 trading update, withdraws existing profit guidance), Dr. Martens [DOCS.UK] +4.0% (CFO to retire, Q4 trading update).

Financials: 888 Holdings [888.UK] +15.5% (trading update).

Healthcare: Dechra Pharmaceuticals [DPH.UK] +37% (hearing M&A blog made constructive comments – post close), Nicox [COX.FR] +29.5% (potential additional annual net sales of >$100M within 7 years from Ocumension Therapeutics ZERVIATE NDA submission), Koninklijke Philips [PHIA.DE] -2.5% (FDA statement on recall), Comet Group [COTN.CH] -1.5% (reports Q1 sales).

Industrials: Alstom [ALO.FR] -6.0% (CFO to step down; analyst action – cut to hold at Deutsche Bank).

Technology: Tomtom [TOM2.NL] +11.5% (reports Q1, affirms FY23).

Materials: Covestro [1COV.DE] -2.0% (reports prelim Q1).


German Economy Ministry noted that Q1 GDP likely to have risen slightly QoQ; Technical recession could then be avoided.

Hungary PM Orban stated that could not phase out price caps at this time. To maintain food caps as inflation is way too high.

IEA Monthly Oil Report trimmed 2023 global oil demand growth from 2.1M bpd to 2.0M bpd (demand seen at 101.9M vs. prior 102.0M bpd). IEA noted that OPEC Production cuts could push crude prices higher. Russian oil exports at 8.1M bpd (highest since April 2020).

Currencies/fixed income

– USD remained on soft footing was poised to register its 5th straight week of losses (worst performance since mid-2020). Recent US data appeared to suggest that the Fed could end its rate-hike cycle. Greenback hindered by expectations that the Fed could even begin a series of cuts before the end of the year.

EUR/USD near 1-year highs at 1.1060 by med-session. Over the past 24 hours a barrage of ECB speak kept the door open for a 50bps rate hike at the next ECB decision in May.

GBP/USD at 1.2510.

– USD/JPY at 132.40.

Economic data

(FI) Finland Mar CPI M/M: 0.6% v 0.8% prior; Y/Y: 7.9% v 8.8% prior.

(FI) Finland Feb GDP Indicator Y/Y: 0.4% v 1.2% prior.

(FI) Finland Feb Final Retail Sales Volume Y/Y: -2.8% v -3.3% prelim.

– (DE) Germany Mar Wholesale Price Index M/M: 0.2% v 0.1% prior; Y/Y: 2.0% v 8.9% prior.

(SE) Sweden Mar CPI M/M: 0.6% v 0.9%e; Y/Y: 10.6% v 11.0%e; CPI Level: 398.08 v 395.82 prior.

– (SE) Sweden Mar CPIF M/M: 0.4% v 0.7%e; Y/Y: 8.0% v 8.3%e.

– (SE) Sweden Mar CPIF (ex-energy) M/M: 0.6% v 0.8%e; Y/Y: 8.9% v 9.1%e.

– (CH) Swiss Mar Producer & Import Prices M/M: +0.2% v -0.2% prior; Y/Y: 2.1% v 2.7% prior.

(FR) France Mar Final CPI M/M: 0.9% v 0.8% prelim; Y/Y: 5.7% v 5.6% prelim; CPI (ex-tobacco) Index: 115.92 v 115.06 prior.

– (FR) France Mar Final CPI EU Harmonized M/M: 1.0% v 0.9% prelim; Y/Y: 6.7% v 6.6% prelim.

– (ES) Spain Mar Final CPI M/M: 0.4% v 0.4% prelim; Y/Y: 3.3% v 3.3% prelim;

– (ES) Spain Mar Final CPI EU Harmonized M/M: 1.1% v 1.1% prelim; Y/Y: 3.1% v 3.1% prelim.

– (ES) Spain Mar Final CPI Core M/M: 0.7% v 0.7% prior; Y/Y (final): 7.5% v 7.5% prelim.

– (CN) Weekly Shanghai copper inventories (SHFE): 149.5K v 155.8K tons prior.

– (PL) Poland Mar Final CPI M/M: 1.1% v 1.1% prelim; Y/Y: 16.2% v 16.2% prelim.

– (RU) Russia Narrow Money Supply w/e Apr 7th(RUB): 17.0T v 16.86T prior.

– (IT) Italy Feb General Government Debt: €2.772T v €2.750T prior (record high).

Looking ahead

– 05:25 (EU) Daily ECB Liquidity Stats.

– 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2031, 2038 and 2050 Bonds.

– 06:00 (UK) DMO to sell £4.5B in 1-month, 3-month and 6-month bills (£0.5B, £1.5B and £2.5B respectively).

– 06:45 (US) Daily Libor Fixing.

– 07:00 (IL) Israel Mar CPI M/M: 0.5%e v 0.5% prior; Y/Y: 5.1%e v 5.2% prior.

– 07:30 (IN) India Weekly Forex Reserve w/e Apr 7th: No est v $578.4B prior.

– 07:30 (IS) Iceland to sell Bonds (switch auction).

– 08:00 (IS) Iceland Mar Unemployment Rate: No est v 3.7% prior.

– 08:00 (BR) Brazil Jan IBGE Services Volume M/M: -1.4%e v +3.1% prior; Y/Y: 7.5%e v 6.0% prior.

– 08:00 (UK) Daily Baltic Dry Bulk Index.

– 08:30 (US) Mar Advance Retail Sales M/M: -0.4%e v -0.4% prior; Retail Sales (ex-auto) M/M: -0.4%e v -0.1% prior; Retail Sales (ex-auto/gas) M/M: -0.5%e v 0.0% prior; Retail Sales (control group) M/M: -0.5%e v 0.5% prior.

– 08:30 (US) Mar Import Price Index M/M: -0.1%e v -0.1% prior; Y/Y: -4.1%e v -1.1% prior; Import Price Index (ex-petroleum) M/M: No est v -0.4% prior.

– 08:30 (US) Mar Export Price Index M/M: No est v 0.2% prior; Y/Y: No est v -0.8% prior.

– 08:30 (CA) Canada Feb Manufacturing Sales M/M: -2.7%e v +4.1% prior.

– 09:00 (CA) Canada Mar Existing Home Sales M/M: No est v 2.3% prior.

– 09:15 (US) Mar Industrial Production M/M: 0.2%e v 0.0% prior; Capacity Utilization: 79.1%e v 78.0% prior; Manufacturing Production: -0.1%e v +0.1% prior.

– 10:00 (US) Apr Preliminary University of Michigan Confidence: 62.0e v 62.0 prior.

– 10:00 (US) Feb Business Inventories: +0.3%e v -0.1% prior.

– 11:00 (CO) Colombia Feb Manufacturing Production Y/Y: -0.3%e v +0.2% prior; Industrial Production Y/Y: No est v 0.8% prior.

– 11:00 (CO) Colombia Feb Retail Sales Y/Y: 0.8%e v 1.2% prior.

– 11:00 (EU) Potential sovereign ratings after European close (Fitch on Portugal and Croatia Sovereign Rating; Moody’s on Israel Sovereign Rating; S&P on European Union, Czech Republic and Romania Sovereign Rating).

– 12:00 (UK) BOE’s Tenreyro.

– 13:00 (US) Weekly Baker Hughes Rig Count.

– 14:15 (DE) ECB’s Nagel (Germany).

– 15:00 (AR) Argentina Mar National CPI M/M: 7.0%e v 6.6% prior; Y/Y: 103.2%e v 102.5% prior.