As the North American session begins, the AUD is the strongest and the CHF is the weakest. The USD is mostly lower to start the trading day. The declines in the USD are led by gains in the AUD and the NZD. However, at the start of the new trading day, Australia's GDP came weaker at 0.2% versus 0.3% estimate. That helped to push the AUDUSD and the NZDUSD lower at first, but then things started to turn around.
A catalyst? Cuts from slower growth leading to growth and perhaps some technical shifts as well.
Commonwealth Bank of Australia (CBA) reiterating its forecast for three rate cuts of 25 basis points each after analyzing the economic indicators. According to CBA's analysis, economic momentum has significantly slowed, with household consumption showing minimal growth and a notable decline on a per capita basis over the past year. While recurrent public spending and business investment have shown some growth and net exports have contributed positively to the economy, residential construction has seen a sharp decline, exacerbating the imbalance between supply and demand in the housing market. Additionally, while nominal GDP grew by 1.4% for the quarter, driven by higher domestic prices, improved terms of trade, and a slight increase in production, real household disposable income has decreased over the year, despite a quarterly increase. The savings rate has risen to 3.2%, yet remains below the pre-pandemic five-year average of approximately 6.0%. In light of these developments, CBA expects the RBA to commence its rate cutting cycle in September, followed by two additional cuts, totaling three 25bp reductions for the year 2024. Technically, the pair pushed back above its 100-hour MA at 0.6508 and more recently the 200-hour MA at 0.6522.
UK Chancellor of the Exchequer Hunt is presenting the UK budget. Some headlines so far:
- Government will freeze alcohol duty through February 2025.
- Government will freeze fuel duty for a further year; that will help lower headline inflation by 0.2 percentage points in 2024/25.
- OBR forecasts headline debt will fall every year of the forecasts.
- Government will meet fiscal rule with GBP 8.9 billion of headroom (versus November forecast of GBP 13 billion).
- UK OBR Forecasts 2024
- GDP Growth of 0.8% (expected 0.0%, previous 0.7%, BoE 0.25%);
- 2025 growth of 1.9% (expected 1.3%, previous 1.4%, BoE 0.75%);
- 2026 growth of 2.2% (expected 1.7%, previous 2.0%, BoE 1.0%).
Today in the US, the employment data gets a kick start with the ADP jobs data due to be released at 8:15 AM with the expectations for a gain of 150K vs 107K last month. The rise last month was much less than the BLS look at the jobs which showed a gain of 353K. That raises the question of reliability in its numbers. The JOLTS job opening will be released at 10 AM with expectations for a dip to 8.9M from 9.026M last month.
Fed Chair Powell will start is today needed to Capitol Hill line the gifts this semiannual testimony to congressional and Senate leaders. He starts in the Houses of Representatives today. The testimony will last two–three hours and will be monitored by the markets to gauge when the Fed may first ease. The last dot plot had the Fed easing three times in 2024. Atlanta Fed Pres. Bostic speculated on one cut in the summer, followed by a pause, and another cut later in the year. Will the Fed chair tilt toward that leaning as well given the stronger-than-expected growth and inflation seen in January? We will see what transpires in the marathon Q&A session and from his prepared text. I am not sure but sometimes, the prepared text is released early at 8:30 AM ET (be aware).
Also on the calendar is the BOC rate decision with no change expected. That decision will be announced at 9:45 AM ET
A snapshot of the markets as the North American session begins currently shows:
- Crude oil is trading at up $0.65 or 0.83% at $78.80. At this time yesterday, the price was at $78.14
- Gold is trading up up $5.96 or 0.27% at $2133.81. At this time yesterday, the price was at $2124.08.
- Silver is trading up $0.12 or 0.52% at $23.78. At this time yesterday, the price was at $23.93
- Bitcoin currently trades at $66,133. At this time yesterday, the price was trading at $67,340. Yesterday the price reached a new all-time high of $69,210
In the premarket, the US stocks, the major indices are trading higher after declines across-the-board yesterday
- Dow Industrial Average futures are implying a gain of 96.90 points. Yesterday, the index fell -404.64 points or -1.04% at 38585.20
- S&P futures are implying a gain of 22.10 points. Yesterday, the index fell -52.30 points or -1.02% at 5078.64
- Nasdaq futures are implying a gain of 146.25 points. Yesterday, the index fell -267.92 points or -1.65% at 15939.59
In the European equity markets, the major indices are trading mostly on:
- German DAX, +0.12%
- France CAC +0.14%
- UK FTSE 100, +0.39%
- Spain's Ibex, +1.16%
- Italy's FTSE MIB, +0.57% (delayed by 10 minutes).
Shares in the Asian Pacific markets were mixed:
- Japan's Nikkei 225, -0.02%
- China's Shanghai composite index, -0.26%
- Hong Kong's Hang Seng index, +1.70%
- Australia S&P/ASX, was 0.12%
Looking at the US debt market, yields are marginally higher:
- 2-year yield 4.549%, -0.3 basis points. At this time yesterday, the yield was at 4.570%
- 5-year yield 4.142%, +0.7 basis points. At this time yesterday, the yield was at 4.178%
- 10-year yield 4.148% +1.2 basis points. At this time yesterday, the yield was at four point 25%
- 30-year yield 4.291% +1.8 basis points. At this time yesterday, the yield was at 4.324%
- The 2-10 year spread is at -40.2 basis points. At this time yesterday, the spread was at -39.5 basis points
- The 2-30 year spread is at -25.7 basis points. At this time yesterday, the spread was at -25.6 basis points
European benchmark 10-year yields are higher:
