As the North American session begins, the JPY is the strongest and the NZD is the weakest. The USD is marginally higher vs all the major currencies with gains of 0.06% to 0.26% (vs. the NZD), and a decline (-0.42%) vs the JPY.
In the Asian Pacific session, BoJ's Takata shed light on the evolving dynamics of Japan's economy, specifically in relation to the spring wage negotiations. Takata observed a notable uptick in momentum, with many companies proposing wage increases that surpass those of the previous year, 2023. This trend is indicative of a broader economic optimism, suggesting that the long-sought-after 2% inflation target is gradually coming within reach, even amidst ongoing uncertainties in the economic landscape. Takata pointed out that Japan's economy is at a critical turning point, moving away from the long-held belief that wages and prices are static. In response to these developments, Takata proposed several measures for the Bank of Japan to consider. These include moving away from the current yield curve control framework, ending the policy of negative interest rates, and reevaluating the commitment to an inflation overshoot. The JPY moved sharply higher on the comments with the USDJPY moving sharply away from its ceiling area that has been limiting gains between 150.71 and 150.87 (high from 2024). The low price extended down to a low of 149.60 before bouncing. The current price is trading above and below the natural bias defining level of 150.00. The 100 bar MA on the 4-hour chart is at 149.96. There is a swing area between 149.70 to 150.158 (see red numbered circles on the chart below).
The focus today in the US session will be centered on the release of January's Personal Consumption Expenditures (PCE) price data, the Federal Reserve's preferred inflation measure. Recent CPI data have pushed Federal Reserve rate cuts to later this year. The focus is on whether the unexpected increase observed in January's Consumer Price Index (CPI) will be reflected in the PCE data, reinforcing the Fed's cautious stance on the timing of rate reductions. Forecasts suggest a moderation in year-on-year headline and core PCE inflation rates to 2.4% and 2.8% (from 2.6% and 2.9% last month) respectively. The Month on month data is forecast to rise by 0.3% and 0.4%, indicative of sustained inflationary pressures.
Also released at 8:30 AM will be the weekly initial jobless claims (expectations 210 versus 201K last week) and continuing claims (1.874M versus 1.862M last week). Personal income and personal spending is expected at 0.4% and 0.2% respectively. Monthly Canada GDP is expected 0.2%.
A 10 AM, US pending home sales will be release with expectations centered around 1.4% increase versus 8.3% last month.
Fed speak today includes Atlanta Fed Pres. Bostic at 10:50 AM, and Cleveland Fed Pres. Mester at 1:15 PM.
A snapshot of the markets as the North American session begins currently shows:
- Crude oil is trading near unchanged at $78.55. Yesterday at this time, the price was at $78.15
- Gold is trading down $2.99 at $2031.17. Yesterday this time, the process trading at $2030
- Silver is trading down $0.09 or -0.45% at $22.33. Yesterday at this time, the price is trading at $22.33
- Bitcoin currently trades at $62,547. Yesterday this time yesterday, the price was trading at $59428 before running up to the $64,000 level intraday and then back off..
In the premarket, the US stocks the major indices are trading lower:
- Dow Industrial Average futures are implying a decline of -133 points. Yesterday the index fell -23.39 points or -0.06 percent at 38949.03
- S&P futures are implying a decline of 13.01 points. Yesterday the index fell -8.40 points or -0.17% at 5069.77
- Nasdaq futures are implying a decline of -41 points. Yesterday the index fell -87.56 points or -0.55% at 15947.74
In the European equity markets, the major indices are trading mixed:
- German DAX, +0.37%
- France CAC -0.11%
- UK FTSE 100, +0.35%
- Spain's Ibex, -0.22%
- Italy's FTSE MIB, was 0.22% (delayed by 10 minutes).
Shares in the Asian Pacific markets were mixed
- Japan's Nikkei 225, -0.11%
- China's Shanghai composite index, +1.94%
- Hong Kong's Hang Seng index, -0.15%
- Australia S&P/ASX, +0.50%
Looking at the US debt market, yields are moving higher head of the PCE data.
- 2-year yield 4.697%, +5.2 basis points.. At this time yesterday, the yield was at 4.65%
- 5-year yield 4.323%, +5.1 basis points. At this time yesterday, the yield is at 4.297%
- 10-year yield 4.317%, +4.3 basis points. At this time yesterday, the yield was trading at 4.287%
- 30-year yield 4.443%, +3.3 basis points at this time yesterday, the yield was at 4.4418%
- The 2-10 year spread is at -37.6 basis points. At this time yesterday, the spread was at -39.9 basis points
- The 2-30 year spread is at - -25.2 basis points. At this time yesterday, the spread was at -26.8 basis points.
European benchmark 10-year yields are higher:
