- Fed's Waller: Data in the last few months allowing Fed to consider cutting rates this year
- Waller Q&A: It will be up to committee on timing of when to start cuts
- Canada December CPI 3.4% y/y vs 3.4% expected
- US Empire manufacturing index for January -43.7 versus -5.0 estimate
- ECB's Centeno: We should avoid undershooting on inflation
- Canada Dec housing starts 249.3K vs 243.0K expected
- EIA sees shale production down about 900 bpd in February
- ECBs Muller: Markets expectations for 2024 are aggressive
- ECBs Simkus: I am far less optimistic than market on rate cuts
Markets:
- Gold down $27 to $2027
- US 10 year yields up 11 bps to 4.06%
- WTI crude oil down 74-cents to $71.95
- S&P 500 down 18 points to 4765
- USD leads, JPY lags
Was it something Waller said? I'm not so sure it was. The US dollar was strong ahead of Waller and bonds were soft. That continued through the worst reading in 22 years on the Empire Fed, outside of the pandemic. Then Waller stepped up and some of the headlines had a hawkish bent but reading the speech was just the opposite. The whole thing was an argument for why the Fed should have more confidence in cutting rates this year. The caveats were that he didn't know when to cut and how much to cut. It certainly wasn't a pushback against current market pricing.
After the initial Waller kneejerk, risk assets hit the highs of the day and US stocks briefly traded positive. However a second wave of USD buying occurred, perhaps in response to his comments on tapering QT as he didn't sound in a big rush to get it underway. Again, that might be stretching to put meaning into something that wasn't really there.
It might be easier to interpret today's moves as a backup to an outside bid in the front-end late last week. At the same time, China has turned into a real blackhole and that's starting to have some second-order effects on things like AUD and the dollar.
As for the overall moves today, they were substantial with USD/JPY nearing the 61.8% retracement of the Nov-Dec decline and the commodity currencies sinking to one-month lows. EUR/USD edged through the low of the year at 1.0875 but didn't extend much beyond that and will finish around that number.
The day ahead features some top-tier China data and US retail sales so the table is set for more volatility.
