Markets in Waiting Position for US March CPI

Today's focus will be on the US March CPI, where we forecast both headline and core inflation at +0.3% m/m SA. Higher oil prices continue to lift headline inflation, but the Fed focuses more on the underlying price pressures, not least after concerning upticks in services inflation and strong labour market in early 2024. In the evening, minutes from FOMC's March meeting are also due for release.

All Eyes Turn to US March CPI Today

All eyes turn to US March CPI today. Fed’s Bostic late yesterday reiterated he expects a slow pace of disinflation for the remainder of 2024. It’s key in his projection of only one rate cut this year. Bostic didn’t rule out the possibility of that one cut being moved out further in time, implying no rate cuts at all in 2024.

NZ Dollar Rises as RBNZ Pauses

The New Zealand dollar has extended its gains on Wednesday and is higher for a third straight day. In the North American session, NZD/USD is trading at 0.6074, up 0.24%.

Crypto Market Looking for Triggers

The cryptocurrency market did not find the strength to accelerate and rolled back almost 2.3% on the day to $2.6 trillion, but that is still a gain of 3.5% in seven days. In other words, the market is holding on to its uptrend but needs drivers for further movement.

Canadian Dollar Calm Ahead of BoC Decision

The Bank of Canada is widely expected to hold the cash rate at 5.0% at today’s meeting. The BoC’s rate policy has been “higher for longer”, with policy makers reluctant to lower rates until there is evidence that inflation is beaten. The BoC’s steep tightening cycle has pushed inflation all the way down to 2.8%, but that is still considerably higher than the inflation target of 2%.

Stars Aligned for Dollar Yesterday, But Greenback Succumbed

Stars aligned for the dollar yesterday (stock & bond sell off; higher oil prices), but the greenback succumbed. The dollar failed to cling to Monday’s post-ISM gains. The trade-weighted dollar (DXY) threw the towel after failing to break 105 resistance (YTD high). EUR/USD set a new short term low at 1.0725, without testing the 1.0695 YTD low.

Start of Correction, Or Support Already in Play?

Crypto market capitalisation is down 1% in 24 hours but has seen a cautious rise from a low of $2.43 trillion to $2.51 trillion since the start of the day on Wednesday. The Cryptocurrency Fear and Greed Index has rolled back to 71 (“Greed”) after over a month of “Extreme Greed”. Technically, this sink looks like an invitation for a deeper dive.

EUR/USD Drifting as Eurozone Inflation Drops

Inflation in the eurozone continues to decline. March CPI eased to 2.4% y/y, down from 2.6% in February and below of the market estimate of 2.6%. This matched November’s 28-month low and was driven by the continued slowdown in food inflation. Monthly, CPI rose to 0.8%, up from 0.6% but below the forecast of 0.9%.

Sunset Market Commentary

EMU Flash March CPI ‘eased’ slightly more than expected from 2.6% Y/Y to 2.4% Y/Y. Core inflation (ex-energy) dropped from 3.1% to 2.9%, the first sub 3% reading since February 2022. Food price inflation slowed further from 3.9% to 2.7%. Energy inflation was still negative (-1.8% Y/Y), but the favorable comparison base is petering out. Industrial goods inflation also slowed further from 1.6% to 1.1%, but services inflation held stable at 4% for the fifth consecutive month.

Will NFP Report Take June Off the Rate-Cut Map?

At its latest gathering, the Fed appeared more dovish than expected, still pointing to three quarter-point rate cuts for 2024. This allowed market participants to add back to their June cut bets, lifting the probability for a 25bps reduction to around 80%.