Good morning
Another day, another equities fall, and a weaker USD. The DJIA dropped 1% yesterday, pretty good when compared with the 1.8% fall in S&P500 and the 2.6% drop in Nasdaq. The UKs FTSE was nearly 1% lower although other European indices fared better, the Dax was up nearly 1.5% on the day. Overnight most Asian markets were lower, led by the Nikkei that was over 2% down. The lower USD comes as the US faces the costs of its trade policy with little in the way of growth.
Concerns mount over the White House pledge to cut the deficit from 6% to 3%, now it looks like that deficit could in fact rise. US treasuries, once regarded as one of the safest assets, are losing their shine. Plenty of uncertainty around the US economy right now, todays nonfarm payrolls may well offer a glimpse of whether the doom and gloom that has cast a shadow over the economic outlook is valid.
The Euro is performing well for the time being, trading up around 1.0840 against the US dollar as I type, just through that technical area I mentioned yesterday, and it is also up against GBP, now 1.1910 , a fall of over 200 pips from this week’s highs. EUR strength comes despite the ECB rate decision yesterday where they cut rates 25bps to 2.65%, a move that had been widely expected.
Lagarde expressed concern over the trade and geopolitical issues that are very much in play right now, and made it clear ECB are still very much on a meeting by meeting decision process, able to cut rates if data warrants. She did mention the risk of inflation from increased defence and infrastructure spending but also said that spending would give a boost to the European economy. German government bond yields remain supported, now around 2.8%.
BoEs Mann gave a damning outlook for the UK, saying BoE should discard the ‘gradual approach’ and cut rates sharply in order to prop up a struggling UK economy and help it ride the turbulence created by tariff talk and Ukraine. Mann, usually a hawk, was the only BoE policy maker to vote for a 50bps cut at the last BoE meeting.
USDJPY is lower once again, still driven by the generally weaker USD and ongoing talk of more BoJ rate rises, plus the general feeling that Japan is under pressure from US to prevent Yen depreciation. The pair slipped as low as 147.30 yesterday and currently trades only 15 pips or so above that level. GBPJPY is 190.50. Still, Japan officials have expressed concern abuot the pace of the Yen move higher and say they will take action to prevent excessive moves, particularly if they are deemed to be driven by speculators.
Trump has once again deferred tariffs on Mexico and Canada, now out to 2nd April, on any goods that came under the USMCA trade agreement. Trump does seem to have been surprised by the strength of anger and opposition from his tariffs both abroad and in the US. Trump and Zelensky are expected to meet next week as Trump pushes for a minerals deal, Zelensky certainly sounds more receptive to a peace deal and is looking for a ceasefire as a prologue to peace talks which he says will prove whether Russia accepts the need to end the war, coming as Ukraine announce a huge Russian drone and missile attack earlier today that targeted Ukrainian energy infrastructure.
Plenty of Fed officials were speaking yesterday and more again today ahead of the Feds blackout period that begins tomorrow. Feds Waller says he still sees two or three rate cuts this year, Bostic sees rates steady for now, waiting to see the impact of Trump’s trade policies. He says the economy is very much up in the air right now. I think we can all agree that the outlook for the global economy is hugely uncertain right now.
I was fortunate enough to not watch Spurs yesterday, by all accounts their performance was at best described as lacklustre as they lost 1-0. Premier League action this weekend sees Spurs host Bournemouth but the highlights could well Man Utd v Arsenal be Notts Forest v Man City on Saturday and then Man Utd v Arsenal on Sunday. Liverpool v Southampton could bring a lot of goals.
Over the weekend we also have the final of the cricket Chapmions Trophy, as India take on New Zealand. The six nations kicks off again this weekend, Ireland x France should be a storming match, while England will be looking for a strong performance against an Italian side that is probably better than it’ results suggest. .
US nonfarms today will be the ley, so much attention is on the US labour market. Consensus is for a headline of artound +160k, with average hourly earnings and the unemployment rate expected to stay at 4.1% and 4% respectively. Anything weaker is likely to add to the weak dollar story, I have seen some talk of a headline of just +80k and a rise in the unemployemt rate, either of those would be enough to send shocks through the markets. Comments from Lagarde and EU GDP is likely to be overshadowed by the US data today, it could be interesting to hear what the various Fed officials say after the US data.
Have a great day, and a fantastic weekend as and when it comes.
- 09.30 ECBs Lagarde, Nagel speak
- 10.00 EU GDP, employment change
- 13.30 US nonfarm payrolls
- 13.30 CAD employment
- 15.15 Feds Bowman speaks
- 15.45 Feds Williams speaks
- 17.20 Feds Kugler speaks
- 17.30 Feds Powell speaks
- 18.00 Feds Kugler speaks
Comments