The Morning Update

The USD rallies, oil prices are steady, equity markets are mixed, and US yields ease on dovish central banks. The USD is set for its strongest week of gains in two months, while equity markets are headed for their best week of 2024 after global central banks indicated that a pivot towards looser policy is on track for 2024. This week saw the Fed maintain its rhetoric for three interest rate cuts in 2024, the Bank of England policymakers were more dovish, the Swiss National Bank surprised markets by becoming the first major central bank to ease its interest rates, and the Mexican Central Bank cut its interest rates by 1/4% to 11% on Thursday. Elsewhere, sports retailers came under pressure after Nike said sales would take a hit as it realigns merchandise to match shoppers' tastes better. Oil, Gold, & Bitcoin slipped below weekly highs as investors assessed the outlook of global interest rates and ongoing geopolitical tensions. Today's focus is CAD Retail Sales, Fed's Chair Powell, Barr & Bostic, German Buba President Nagel & ECB's Lane speeches.

‍

In other news. Apple is accused of monopolizing smartphone markets in a US antitrust lawsuit. EU leaders expected to back tighter eurozone fiscal stance in 2025. Thai scientists breed coral in labs to restore degraded reefs. Chrysler recalls about 286,000 vehicles due to airbag inflators. Reddit rallied 48% in NYSE debut after selling shares at the top of the range. The US urged Ukraine to halt strikes on Russian oil refineries. The EU looks to bypass the treaty ban on buying arms to support Ukraine. The US to call for immediate ceasefire in Gaza in UK resolution. Simon Harris is on course to become Ireland's next Prime Minister. Republican House Speaker set to invite Netanyahu to address US Congress.

‍

In currency markets. MXN & CHF remain under pressure following their interest rate cuts. The Chinese yuan slips to fresh 4-month lows, and markets see state-owned banks supporting the CNY. JPY holds above 151 as markets look to the BoJ for possible intervention to support the currency. CNY and Asian currencies weaken by 0.4% on average vs USD. Trading currencies remain under pressure vs. a strengthening USD, with ZAR, AUD, NOK & SEK tumbling 0.9%, NZD weakening 0.7%, MXN slipping 0.25%, and JPY flat vs. USD.

‍

In commodity markets. Oil & Natural Gas prices are flat, Gold & Wheat prices weaken by 0.75%, and Silver, Soybean & Copper prices tumbled by 0.95%.

‍

CAD weakens to near three-week lows amid weakening commodity prices and a rallying USD on stronger domestic economic data. Domestically, optimism is increasing that the BoC is getting closer to pivoting its rates policy following the SNB cutting its domestic interest rates. BoC Deputy Governor Gravelle said the central bank will likely wrap up its quantitative tightening in 2025; this is later than expected, considering inflation figures are improving. Investors will be focused on CAD Retail Sales (ex-autos), which are expected to slip -0.4% vs. +0.6%. We expect investors will be focused on the flurry of central bankers, including Fed Chair Powell speaking today, which will be the primary driver of market direction today.

‍

EURCAD remains steady, with the currency pair holding flat in March as investors remain sidelined, waiting for the central bankers to give more precise signals on domestic interest rates in 2024.

‍

EUR gives up its March gains and is back to flat vs. USD as it battles to hold above 1.0800. The strengthening USD saw the Euro weaken over 130 bps as investors anticipate the ECB could ease its domestic interest rates as soon as May amid easing eurozone inflation pressures and improving economic conditions. Domestically, the German IFO Business climate, current assessment, and expectations in March beat expectations, which supported the euro ahead of 1.0800. The intraday focus will be on Buba president Nagel, EBC Lane, and Fed Chair Powell's comments to help provide direction for the single currency.

‍

GBPEUR continues to weaken, with the pound giving up all March gains, turning negative and hitting a fresh two-month low as BoE policymakers voted to hold to ease interest rates in March.

‍

GBP breaches 1.2600 amid disappointing retail sales and strong USD demand. The tests fresh four-week lows on disappointing UK retail sales, highlighting that UK consumer spending stagnated in February and the increasing dovish tones from the Bank of England. The Bank of England kept interest rates on hold in February, but comments from BoE Governor Bailey saying that rate cuts "were in play" in 2024 triggered selling pressure on the pound. This week, we have seen the pound tumble from a high of 1.2803 to today's low of 1.2572 on the combination of a rallying USD and expectations the BoE will be cutting interest rates sooner than initially expected.