Sunset Market Commentary

It was a drawn-out stretch towards the publication of the US services ISM today (read about it down below). Core bonds in the meantime gained ground with US Treasuries in particular shaking off yesterday’s Bostic’s comments. The Atlanta Fed president warned for inflation risks from “pent-up exuberance”.

ISM Shows Services Sector Expansion Continued in February

Another month of expansion in the service sector – albeit at a slightly slower rate than the consensus was expecting. However, there were some mixed signals under the hood, with employment falling short of expectations but new order growth firming in the month.

ECB to Ask for More Patience Before Rate Cuts

Hawkish views by central bankers and positive economic data have led investors to reconsider their expectations of aggressive rate cuts. Although no actions are anticipated during the European Central Bank's policy review this week, the board's updated economic projections may shed light on the feasibility of a rate cut in June.

Dissecting ECB Monetary Policy Decisions Communiqué

Complementing the detailed ECB preview, this report focuses on the first communication made by the European Central Bank after the completion of each rate setting meeting. A press statement called “Monetary policy decisions” is released at 13:15 GMT and it is the first point of reference for traders. This communiqué has grown in both length and importance since President Lagarde took over on November 1, 2019. 

Trump Big Winner on Super Tuesday

Former president Donald Trump expectedly came out a major winner of the so-called Super Tuesday. Trump had by 6.45 CET secured 662 delegates out of the 1215 republican that were up for grabs between the 15 different states that voted in the republican primaries yesterday. His opponent Nikki Haley had Tuesday secured 36 at that point in time.

Canadian Dollar Flat Ahead of BOC Meeting

The Canadian dollar is trading quietly on Wednesday. In the North American session, USD/CAD is trading at 1.3580, down 0.08%. On the economic calendar, the Bank of Canada holds its rate meeting. The US will release JOLTS Job Openings, which is expected to tick lower to 8.9 million in February, compared to 9.02 million a month earlier.

Bitcoin Spooked by Highs, Ethereum Still Climbing

Bitcoin briefly topped $69K on Tuesday, setting a new all-time high, but has since corrected by more than 15%. The size, speed and nature of the decline indicate a desire for “weak hands” to exit Bitcoin. At its lowest point, the price fell below $59K due to large orders that the market was unable to quickly digest. Excluding this spike, we can assume that the price fell to $62K – last week’s consolidation area – wiping out all the recent gains.

Sunset Market Commentary

Remarks of Fed Chair Powell’s semi-annual testimony before US Congress sounded very familiar. Rate cuts are coming “at some point this year” but “the committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%”.

BoC Holds Rates Steady in March With Dovish Lean

The BoC’s decision to hold the overnight rate steady again in March confirmed that interest rates are already at levels that are high enough to restrict economic activity and further slow price pressure. We expect the BoC to start gradually lowering the policy rate by mid-year, after allowing for clearer signs of easing in core inflation readings to come through.

Japanese Wage Data and BoJ Comments Suggest Policy Change Coming Ever Closer

This morning, the move is extended on yen strength as higher than expected Japanese wage data and BoJ comments suggest a policy change is coming ever closer (USD/JPY 148.1). UK Fin Min Hunt announced in the Spring budget some modest tax cuts (including a 2% reduction in the National insurance tax). However, they were not seen as changing the picture for BoE policy in any profound way. Sterling lost marginally against the euro, holding within well-known territory (close 0.8561).