Daily Market Update

Overview

The Buck is down slightly across the board ahead of Federal Reserve Chair Jerome Powell’s congressional testimony this week as markets begin to parse through his preliminary statements. No one expects Powell to say anything on interest rates that markets haven’t already digested, and he will likely stick close to the Fed’s own dot plot pricing in three interest rate cuts this year. The question remains, however, as to when these cuts will begin, with May, June, and July all in the running. ADP payrolls were released this morning, slightly below expectations, but the Dollar’s negative tinge is much more due to news out of the rest of the world than domestically so far.

First on the docket this morning, the UK released its annual budget, and Chancellor Jeremy Hunt spoke to Parliament outlining the nation’s growth potential and targets for the year, stating that analysts from the OBR show inflation falling below 2% in just a few months’ time, a bit of a surprise. The UK’s growth is likely to be stagnant this year, and there is little in the way of hints on the Bank of England’s potential path toward interest rate cuts this year. The Eurozone also saw retail sales for February release this morning stronger than expected, but still in negative territory. The contrast between the US and the rest of the world’s larger economic situations continues to be quite clear – what would be bad news for the US is seen as good news for the UK and Eurozone in particular, leaving the Dollar in the lurch with little room for upside remaining. The Bank of Canada also releases its latest interest rate decision this morning at 10 am, kicking off this central bank cycle. The European Central Bank follows tomorrow, and though no benchmark interest rate changes are expected from either central bank this week, markets may finally get more forward-looking clues.

What to Watch Today…

EUR ⇑

The single currency has spent the last few trading sessions recovering some ground against the USD and continues that trend this morning, gaining just north of a quarter of a percent. Yesterday’s PMI reading, the final for the month of February, still showed a regional economy in contraction, but perhaps one not quite as deep as initially shown. The European Central Bank releases its latest interest rate decision tomorrow morning, and though very unlikely to cut interest rates this cycle, markets will be watching for any timing signals from Christine Lagarde as growth concerns continue to plague the economic bloc.

JPY ⇑

Japanese Yen continued its positive streak over the last few days and popped stronger overnight after news broke that some voting members of the Bank of Japan may speak positively about ending the world’s last negative interest rate at the BoJ’s meeting later this month. Though an actual policy change this month is extremely unlikely, the verbal cues alone have been enough to keep JPY treading water as markets continue to speculate about the potential for intervention on behalf of the flailing currency. Japanese equities continue to have a banner year.