Daily Market Update

Overview

In the lead-up to a jam-packed data calendar in the back half of this week, the biggest market-mover overnight was news that China is considering a stimulus package to prop up local equities after an unprecedentedly large downturn to begin this year. EMEA currencies are gaining a bit of ground on the news, and Hong Kong stocks jumped 3 percent on the news at one point, but global sentiment does remain depressed and Chinese equities as a whole remain just off their 5-year lows struck yesterday. Adding to global uncertainty, continued airstrikes in Yemen are raising questions about longer-term disruptions of oil and other shipping routes through the Red Sea.

Overnight, the Bank of Japan released its latest policy decision and held interest rates steady at -0.1% as expected, but did strike a moderately hawkish tone in its forward guidance. Very little in the way of concrete policy change is expected from most major central banks during the next two weeks, but forward guidance will be driving currency pairs. Governor Kazuo Ueda did add a bit more certainty to the idea that the world’s last negative interest rate will end but did not give many clues as to when exactly this will happen. Japanese stocks hit a 34-year high on the news. Investors currently are targeting the April meeting, putting the BoJ almost in direct opposition with other G10 central banks, who are largely expected to begin cutting interest rates at some point this spring.

Still to come this week: policy decisions from the Bank of Canada and European Central Bank, along with a slew of PMI data from the US, UK, and Eurozone. As growth prospects continue to be uncertain at best, especially in the UK and Europe, PMI releases may have a rather outsized impact on FX markets through the week.

What to Watch Today…

EUR  ⇑

Ahead of tomorrow’s PMI releases and the European Central Bank’s meeting this Thursday, the single currency is continuing a slow grind weaker against USD. The economic region’s largest economy Germany continues to flash warning signs of a recession, and it’s not likely that Eurozone PMI data will show any positive output signals. The European Central Bank is also all but guaranteed to hold interest rates steady this week, but any shift in tone from President Christine Lagarde promises to influence the pair.

MXN ⇓

Moving contrary to other emerging market currencies, Mexican Peso lost nearly a percent of ground against USD during the early European session ahead of today’s New Hampsire primary in the US. Markets are beginning to price in the possibility of a second term of a Trump presidency, who in his previous term heavily exacerbated trade and immigration tensions between the two nations. Many see today as Nikki Haley’s last stand as Trump’s only remaining serious challenger after Ron DeSantis dropped out of the race over the weekend.