Sunset Market Commentary

Core bonds lost ground with German Bunds underperforming US Treasuries today. It would be unfair to link the former exclusively to the better-than-expected German Ifo indicator but it did support yields moving higher. The headline series improved from 87.9 to 89.4 with an increase in current conditions (88.9) but especially in the expectations component (87.7 to 89.9, the highest since April last year).

JPY Weakness Extends

The JPY continues to weaken with USD/JPY hitting as high as 155.48 in overnight trading. The Japanese monetary and fiscal authorities have earlier said that they are concerned with the continuously weakening of the JPY, and have threatened to intervene in the market over several occasions, but we are still to see some action on the matter.

Crypto: Bears Plotting New Attack

Over the past 24 hours, the cryptocurrency market has lost more than 3.5%, falling to a capitalisation of $2.37 trillion. Bitcoin shows a decline with a similar amplitude; Ethereum lost less than 3%, while BNB added 0.1%, and Solana fell by 6.5%.

Yen in Search of New Lows, Commodity Currencies at a Low Start

The absence of currency interventions from the Bank of Japan and strong macroeconomic data from the United States are pushing the USD/JPY pair to new levels, above which the price has not risen since 1990. However, in the coming trading sessions the situation may change dramatically:

USD/JPY Ticks Higher Ahead of BoJ Meeting

The Japanese yen continues to lose ground on Thursday. In the European session USD/JPY is trading at 155.61, up 0.17%. Earlier, the yen dropped to a 34-year low of 155.74.

Wolf in Sheep's Clothing: Soft GDP Hides Surging Spending

Real GDP grew at only a 1.6% annualized pace in Q1, held back by trade and inventories. Consumer spending in the service sector is not slowing, in fact, it is ramping up at a rate seldom seen in the past 20 years. That is problematic as core PCE prices are picking up again in defiance of higher rates.

Sunset Market Commentary

US Q1 growth slowed 1.6% Q/Qa from 3.4% in Q4 2023 and 2.5% expected. However, domestic spending remained solid with personal consumption still growing 2.5% on solid demand for services (consumption growth on goods was slightly negative). Gross private investment (3.2%) and government consumption (1.2%) also added to growth. The downward surprise was mainly due to a negative contribution from inventories (-0.37% subtraction) and net exports (-0.86% subtraction).

Pound Edges Higher After Soft US GDP

Is the US economy finally slowing down? Recent key indicators, from nonfarm payrolls to consumer inflation have been stronger than expected, but the markets could hear the “thud” of today’s initial GDP for the first quarter, which at 1.6% y/y missed the market estimate of 2.5% and was sharply lower the Q4 2023 reading of 3.4%. Consumer spending slipped to 2.5%, down from 3.4% in Q 2023.

US Economy: Slower Growth With Stronger Inflation

The dollar strengthened, and stocks fell after statistical data from the US. The focus was on the preliminary estimate of GDP for the first quarter. Annualised quarterly growth came in at just 1.6%, down from the 2.5% and 3.4% previously forecast. Disappointment increased given that exceeding forecasts has become the norm. GDP growth for the same quarter a year earlier fell to 3.0% from 3.1%.

Euro Turns to GDP and Inflation Data for a Lifeline

It’s been a difficult year for the euro, which has already declined 3% against the dollar as the economic divergence between the Eurozone and the United States has convinced investors the ECB is set to cut interest rates faster and deeper than the Fed.