Cliff Notes: Inflation Risks Linger

In Australia, the Q1 CPI printed 1.0% (3.6%yr) for headline inflation and 1.0% (4.0%yr) for underlying trimmed mean inflation, meaningfully higher than consensus and likely the RBA’s view too, based on our assessment of its June 2024 forecast (3.3%yr headline, 3.6%yr trimmed mean). The latest update is consistent with an ongoing moderation in consumer inflation, aided in large part by global disinflationary forces within tradables, but the detail did reveal some upside surprises in the quarter.

AI Saves the Day

Facebook’s Meta went on a 10% freefall yesterday, even after the company announced better-than-expected earnings. This being said, yesterday’s selloff ended up being less than suggested in the afterhours trading. CEO Mark Zuckerberg said that, in the past, the company also experienced high price volatility during a period of investment when the results were not […]

Enough Fed Rate Cut Delay is Discounted

In a session deprived of key data, yields and the USD yesterday faced a correction on recent rise. Markets concluded that, without new data evidence on strong US demand or sticky inflation, enough Fed rate cut delay is discounted. A decline in oil prices (high US stockpiles) also supported core bonds. US yields dropped between 5.5 bps (2-y) and 8.6 bps (5-y). The Fed Beige Book preparing the May Fed meeting reported slight or modest growth in most districts.

Australian Dollar Shrugs Off Soft Job Numbers

Australia’s job growth hit the breaks in March and fell by 6,600. This missed the market estimate of a gain of 7,700 and follows a blowout gain of 116,500 in February. Still, the drop was not all that concerning as full time employment increased by 27,900 (part-time roles fell by 34,500). The unemployment rate ticked higher to 3.8%, up from 3.7% in March.

US, Japan Express Concern Over Japanese Yen

The Japanese yen is almost unchanged on Thursday. In the North American session, USD/JPY is trading at 154.44, up 0.03%. It’s a light data calendar today. US unemployment claims were unchanged at 212,000 and the Philly Fed Manufacturing index surged to 15.5 in April, up from 3.5 in March and crushing the market estimate of 1.5. Early on Friday, Japan releases CPI for March, which is expected to tick higher to 2.8%, up from 2.7% in February.

Sunset Market Commentary

German Bund yields in fixed income markets gapped lower at the open this morning, catching up with US Treasuries late yesterday and in Asian dealings this morning. The drop was followed by a drift higher only to reverse course again after some comments from Villeroy. The French ECB governor said he’s open to rate cuts at each meeting after June, which would mean a total of five this year.

Oil, Gold Jump as Israel Responds

Oil and gold jumped on rising geopolitical tensions after Israel struck targets in western Iran as a response to last weekend’s attacks. One of the concerned cities is Isfahan, home to several military bases and facilities, but also to nuclear facilities including the main technology center. Iran said that the nuclear site is safe.

Markets Thrown in Risk-off Modus on Headlines of Israeli Attack on Iran

Markets this morning are thrown in risk-off modus on headlines of an Israeli attack on Iran. In a first reaction, Asian equities spiked lower, but currently are unwinding part of the initial losses. Safe haven flows propelled US Treasuries with yields briefly declining more the 10 bps, but a reversal currently limits the decline between 4.5 (2-y) and 6.5 (10-y) bps. EUR/USD briefly dropped to the 1.061 area, but the 1.06 support remains intact for now (currently 1.063).

GBP/USD Edges Higher After Flat Retail Sales

The British pound dipped 0.30% earlier today but has managed to recover the losses. In the European session, GBP/USD is trading at 1.2451, up 0.12%.

Halving Helped Bitcoin Digest Sell-off

Halving and strong technical support are supporting a ‘buy on dips’ pattern in Bitcoin, and this is affecting the rest of the cryptocurrencies. The halving will take place on Saturday night. The technical picture now suggests that BTCUSD is successfully holding within a corrective pattern, finding support on dips to the 61.8% Fibonacci retracement level of the rally from the January lows.