The USD holds firm, oil prices weaken, and equity markets and US yields are mixed due to persistent inflation concerns. The USD posts gains for the week, while equity markets are muted today, but remain on track for their eighth weekly advance. Risk sentiment has eased, driven by Thursday's US PPI data, which rose more than expected in February, mirroring the higher-than-expected CPI on Tuesday. This week's US inflation figures show that the Fed's action to lower inflation isn't complete and quells the prospect of a Fed easing in June. Elsewhere, Copper prices continue to surge, hitting $9k a ton, while oil and Bitcoin prices eased in early trading. The intraday focus will be on the US NY Empire Price Index, Industrial Production, UoM 5-year Consumer Inflation Expectations, Michigan Consumer Sentiment Index, CAD Housing Start & Wholesale Sales, and ECB's Lane's speech to help provide intraday direction to currency markets.
In other news. Italy's bond spread sinks to a 2-year low as its economy outshines Germany. The EU parliament sues Ursula von der Leyen's commission over Hungary's Euro 10 billion funds. As Russians vote, Putin is on the brink of six more years in power. Hamas presents a ceasefire proposal detailing the exchange of hostages and prisoners. Scholz, Macron, and Task seek to bridge European divisions over Ukraine. Haiti's top gang leader threatens politicians as fires break out in Capital. Japan's blowout wage results may spur the Bank of Japan to hike its domestic interest rates as soon as next week. China urges EV makers to buy local chips as the clash with the US deepens.
In currency markets. The USD holds firm after the US PPI follows the CPI, printing hotter-than-expected inflation levels, dampening the prospect of a Fed easing in June. JPY eases vs. USD as investors remain cautious to see if the BoJ will hike interest rates into positive territory for the first time since 2008. Elsewhere, China keeps interest rates on hold, and commodity currencies are under pressure after hotter US inflation data. CNY and Asian currencies, on average, slip 0.1% vs. USD. Trading currencies are primarily under pressure, with NZD weakening 0.6%, JPY, ZAR, NOK & AUD easing 0.25%, MXN flat, and CHF & SEK firms 0.1% vs. USD.
In commodity markets. Oil prices weaken by 0.5%, Natural Gas prices strengthened by 1%, Gold prices are up 0.4%, Silver & Copper prices rallied by 1.2%, Wheat prices firmed by 0.3%, and Soybean prices slipped by 0.25%.
CAD is holding at an 8-day low vs. the USD following Thursday's hot US PPI print, which prompted investors to rethink the likelihood that the Fed will start easing interest rates in June. Domestically, factory orders grew by 0.2% in January but missed expectations of 0.4%; higher sales of chemical products and motor vehicles drove the growth. The focus will shift to the US Michigan Consumer Sentiment to help provide intraday direction to Loonie today. Still, we expect markets will likely hold current levels ahead of next week's FOMC meeting and the Canadian inflation report.
EURCAD holds on to four-month highs as the Euro consolidates while weaker oil prices pressure the Loonie.
EUR bounces off Thursday's lows but remains capped at 1.0900 ahead of US data releases. The USD maintains its gains vs. the Euro following Thursday's higher-than-expected US PPI data. Domestically, increasing dovish comments from the ECB and the prospect that the Fed won't ease interest rates in Q2/24 is adding selling pressure to the single currency. Markets will be focused on the Michigan Consumer Sentiment Index today, which is expected to hold steady at 76.9%. Still, we expect markets to stay within their current ranges heading into the Fed meeting next week.
GBPEUR is holding steady, with the currency pair trading flat for the month ahead of next week's BoE interest rate decision.
GBP remains on the back foot, sitting at 7-day lows ahead of next week's BoE's interest rate decision. The pound weakened with its peers on Thursday, weighed down by the fading prospect of a Fed interest rate cut in June. With the lack of critical domestic economic data, investors will focus on several top-tier US economic data releases to help provide intraday direction. We expect investors will keep their powder dry heading into a flurry of top-tier data releases next week for the UK, including PPI, CPI, Retail Sales, and the BoE interest rate decision.
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