Weekly Economic & Financial Commentary: The First of Many Ticks Higher in the Longer-Run Median Dot

Last week, the median “longer-run” dot moved higher in the FOMC’s latest Summary of Economic Projections (SEP). The increase in the median dot was small (just 6 bps), but the uptick in the median marks the first time it has been above 2.5% since March 2019. We expect the longer-run dot to continue to cautiously drift higher in coming SEP meetings.

Crude Oil Kicks Off the New Quarter on a Positive Footage

But the weekend data has a positive impact on oil prices on this slow Monday morning, which sees the barrel of oil trading at the highest level since the year started. OPEC meets this week and is expected to make no changes to its supply cut strategy. The cartel is set to extend supply cuts until the end of this quarter.

Japanese Yen Yawns After Mixed Business Confidence Report

The Bank of Japan’s Tankan business confidence survey was a mix and the yen showed a muted response. Business confidence for major Japanese manufacturers eased to 11 in the first quarter, down from a revised 13 in Q4 2023 but above the market estimate of 10. This was the first decline in four quarters and was attributed to weak activity in the auto sector due to production cuts.

German Inflation as a Bellwether for Euro Area Inflation on Thursday

In the euro area, focus is on German inflation data ahead of the important euro area inflation print for March on Thursday. The data released from other countries during Easter indicate that euro area HICP inflation on Thursday will be lower than the consensus forecast of 2.5% y/y as inflation came in lower than expected in France, Italy, and Spain.

New Quarter Starts on a Hawkish Note

Once again, the US data suggests that the Federal Reserve (Fed) should be in no rush to cut the interest rates. The only thing that could pressure the Fed to cut rates sooner rather than later is the end-of-year election, and the popular idea that the Fed may not be able to cut rates this year if it doesn’t starts around summer.

Fed Unlikely to Lower Policy Rate Ahead of September

The welcome return to growth in manufacturing and accelerating prices strengthen our view that the Fed is unlikely to lower its policy rate ahead of September.

Pound Stabilizes as Shop Inflation Drops

The British pound is steady on Tuesday after starting the week with losses. In the European session, GBP/USD is trading at 1.2563, up 0.09%. On Monday, the pound fell 0.57% and dropped as low as 1.2539, its lowest level since February 14.

Consolidation Not Going According to Plan

A promising consolidation has yet to bear fruit. For Bitcoin, the bullish chart picture has not changed: we see only an extension of the consolidation after the rally from the January lows to mid-March. The next key support area is $62.8-63.0K, where the 50-day moving average and the lows of the corrective pullback in March are centred.

Sunset Market Commentary

Core bonds dropped with a continued rise in oil prices ($88.5/b) serving as a common factor. German Bunds underperform US Treasuries. That’s partially a catch-up move as European markets missed out on US action yesterday (Easter Monday). German yields add between 1 (2-y) to 14.3 bps (30-y).

EURUSD Gets Set to Go

The slowdown in German inflation is fuelling hopes that the ECB will ease policy in the coming months. German CPI rose 0.4% m/m, weaker than the 0.5% expected. Annual inflation slowed from 2.5% in February to 2.2% in March, the lowest since May 2021.