Yields and the USD started the day higher on follow through flows after the stronger US ADP jobs report yesterday. However, that move which saw the 10 year move to the highest level since November 2023, and the USDJPY retest the 30+ year highs near 151.945, reversed course after the Institute for Supply Management (ISM) reported the US services index at 51.4 for March 2024, below the expected 52.7 and a decrease from the previous 52.6.

Notably, the employment component showed a minor improvement to 48.5 from 48.0, but still indicated a slight contraction in employment levels within the service sector. New orders experienced a decline to 54.4 from 56.1, reflecting a slowdown in demand. A significant observation was the substantial decrease in prices paid, which fell to 53.4 from 58.6, marking the lowest point since March 2020 and suggesting easing inflationary pressures within the sector. This decline in prices paid was unexpected and served as a significant point of interest, especially as market concerns regarding a new wave of inflation were escalating.

Other components of the report, such as inventories, supplier deliveries, and backlog of orders, also showed declines, indicating overall softening in the services sector's activity. However, new export orders and imports remained above the 50 threshold, indicating expansion, albeit at a slower pace for imports. This mixed bag of indicators suggests a nuanced view of the service sector, with easing prices offering a potential relief against inflation worries, despite softer demand and activity levels.

Later Fed Chair Powell was not overly different from prior comments which further appeased the frightened market. Powell did reiterate the central bank's cautious stance on adjusting interest rates, indicating there's ample time for deliberation over potential cuts. He emphasized the Fed's specific role concerning climate-related financial risks, strictly as a bank supervisor, distancing the institution from climate policymaking to maintain public trust and prevent mission creep. Powell acknowledged the policy rate might be at its peak for the current cycle, amidst an environment where economic risks are gradually balancing out. Despite uncertainties and the dual mandate of the Fed, the labor market shows signs of rebalancing, supported by various data including quits, job openings, and a gradual decline in wage growth. The economy is experiencing solid growth, with inflation on a path towards the 2% target, albeit with recent unexpected inflation and job gains that do not substantially alter the overall economic outlook. Powell stressed the importance of basing decisions on incoming data and remained optimistic about the potential for policy adjustments later in the year, contingent on economic evolution aligning with expectations. He also highlighted the complexity of the inflation scenario, acknowledging both demand and supply shocks, and pointed out the critical balance in timing rate adjustments to avoid derailing progress on inflation or labor market stability. Powell remains hopeful about the role of technological advancements like AI in boosting productivity, albeit acknowledging it's too early for significant impacts, and maintains a commitment to steering the economy towards stable inflation and employment through careful policy management.

In the European session today, inflation came in weaker than expected at 2.4% vs 2.6% last month. The core flash estimate was also lower at 2.9% vs 3.1% last week. Later ECB member de Cos acknowledged, that the decline in both general and core inflation as strong evidence that monetary policy is effectively influencing the economy. While not providing explicit forecasts for future monetary policy directions, he noted that the recent inflation data aligns well with the ECB's mandate to maintain inflation goals. Furthermore, de Cos mentioned that current central scenarios are pointing towards a potential rate cut as early as June, suggesting a shift in the ECB's monetary policy stance in response to the inflationary trends.

Despite the comments, the EURUSD focus was on the USD weakness. For the day, the EURUSD moved up 0.61%. and in the process moved back above the 100 and 200-hour MAs at 1.0774 and 1.07987 respectively. The price then extended above the 38.2% of the move down from the March high at 1.08219 and ended the day trading above and below the 200 day MA at 1.08323. That MA will be the barometer in the new trading day.

The USDJPY today moved up to test the swing highs from 2022 (at 151.94), 2023 (at 151.91) and 2024 (at 151.967 reached last week). The high price today reached 151.94 before rotating lower on the back of the ISM data and the Fed chair's comments . In the new trading day, the traders will be eyeing the 100-hour MA at 151.51 and the 200-hour MA at 151.45.

The AUDUSD moved up 0.71% today and in the run higher, it extended above a cluster of MAs including the 200 day MA at 0.65429, the100 bar MA on the 4-hour chart at 0.6545, and the 200 bar MA on the 4-hour chart at 0.65477. That led to more momentum to the upside in the pair with the high price stalling just short of the 50% midpoint of the range since the October 26, 2023 low at 0.65704 (the high reached 0.6569 and is trading at 0.6560 into the close.

Overall, the AUD is ending the day as the strongest of the major currencies, while the JPY is the weakest. The USD is just behind the JPY as the weakest.

USD

In other market today, yields are closing mostly lower after its initial move higher:

  • 2-year yield 4.672%, -2.9 basis points.
  • 5-year yield 4.330%, -2.2 basis points
  • 10 year yield 4.351%, -1.4 basis points. The 10 year yield reach day holy of 4.429% - the first level since November 27: 2001.
  • 30-year yield 4.512%, +0.3 basis points. The 30-year yield recently I hope 4.570% is his level since November 28, 2023.

US stocks closed mixed with the Dow closing lower with the broader S&P and NASDAQ index higher:

  • Dow industrial average fell -43.10 points or -0.11% at 39127.15.
  • S&P index rose 5.68 points or +0.11% at 5211.48
  • NASDAQ index rose 37.01 points or 0.23% at 16277.46
  • Russell 2000 rose 11.16 points or 0.54% at 2076.20

European shares closed higher after the lower inflation readings:

  • German DAX, +0.51%
  • France CAC +0.29%
  • UK FTSE 100 +0.03%
  • Spain's Ibex +0.52%

in other markets:

  • Crude oil closed higher for the fourth consecutive day. It is currently trading up $0.28 or 0.33% at $85.43.
  • Gold extended to yet another high and traded above the $2300 level for the first time ever. It is currently trading at $2298.80 up $20.10 or 0.80%
  • Bitcoin is trading at $65,571