The Morning Update

Monday April 15th, 2024

Written by:
Paul Harrison

The USD eases, oil prices weaken, equity markets are mixed, and US yields rise in hopes of de-escalating tension in the Middle East. Currency markets improved, while European equities were mixed, and the Dow future rebounded after its worst week of 2024, as investors anticipated diplomatic efforts would help prevent the Israel/Iran conflict from escalating. Elsewhere, Gold eased from $2,347 an ounce, oil prices dropped below $90 a barrel, and Aluminum prices surged to a record high on the LME on the news of US & UK sanctions that banned deliveries of Russian supplies. In focus this week, the US earnings season continues with Goldman Sachs Group Inc, BoA, Morgan Stanley, Netflix, and J&J among the companies releasing earnings this week. On the economic calendar, this week with Monday US Retail Sales. Tuesday China GDP, UK Unemployment Rate, CAD BoC CPI & CAD Budget, Speches from BoE Governor Bailey, BoC Governor Macklem & Fed Chair Powell. Wednesday, UK CPI, US Fed Beige Book. Thursday US Initial Jobless Claims. Friday, UK Retail Sales, & German PPI.

In other news. Biden urges restraint from Israel after Iran's drone and missile attack. Singapore's PM to step down after almost 20 years in power. Samsung announces major Texas plant upgrade. China's capital market activity has fallen to multi-decade lows. Japan's biggest brewer, Asahi, cuts down on the booze as consumers go teetotal. EU mulls new sanctions on Iran as leaders scramble to avert 'wider war.' Rail chaos prompts fresh calls to nationalize England's West Coast Line. Canada will allow 30-year amortization for first-time buyers' mortgages on new homes. Boeing shares on its longest-losing steak since 2018. Tesla to lay off more than 10% of its staff, Electrek reports.

In currency markets. JPY holds near 34-year lows vs USD. South Korea's Finance Minister vows measures to stabilize market volatility if needed. CNY holds near 5-month lows as a strong official fix to help support the domestic currency. Trading currencies rebound as sentiment improves on hopes of a de-escalation in the Middle East. CNY is flat, while Asian currencies are up 0.1% on average vs USD. Trading currencies are mixed, with ZAR weakening 0.65%, JPY down 0.4%, NOK slipping 0.15%, NZD up 0.1%, CHF, SEK & MXN firming 0.2%, and AUD strengthening 0.35% vs USD.

In commodity markets. Oil & Natural Gas prices weakened by 0.9%, Gold prices slipped by 0.35%, Silver prices firmed by 0.3%, Copper prices strengthened by 0.8%, Wheat prices tumbled by 1.3%and Soybean prices eased by 0.3%.

CAD firms in early trading after the USD eases on the prospect of easing tensions between Iran and Israel. Last week, CAD posted its most significant weekly loss vs. USD in nearly a year, testing near 5-month lows, hitting 1.3780 vs. USD. We expect the loonie to remain under pressure vs. the USD with the prospect that CAD BoE could ease interest rates by June, while the US is expected to keep its domestic interest rates on hold for longer as domestic inflation levels remain high. Today, the US retail sales department will help provide intraday direction. Still, the focus will be on Tuesday's CAD inflation report and the Canadian Budget to help give a clearer view of the Canadian economic condition.

EURCAD slips in early trading, eliminating the Euro's gains for April, with both central banks expected to cut interest rates in June.

EUR flat lines at 1.0650 as investors remain sidelined ahead of the US Retail Sales. Despite the improving risk sentiment as markets assess the Middle East developments and an easing USD, the Euro remains steady with the absence of ECB comments and the lack of any crucial domestic economic releases today. The US Retail Sales are expected to ease m/m to 0.3% vs 0.6%, but if we see a higher print, we could see another boost to the USD.

GBPEUR edges higher, testing a fresh monthly high against the single currency as the Euro remains on the back foot with the prospect that the ECB could lower interest rates in June.

GBP edges higher amid a weaker USD and improving risk sentiment. The pound rebounds from 5-month lows, breaking through 1.2450 and attempting to retest 1.2500 amid a weakening USD on optimism of de-escalating geopolitical tensions. Domestically, BoE Governor Bailey will talk several times this week, and the UK retail sales department will be monitored to help provide direction to the pound. The US retail sales and Iran/Israel updates will help provide intraday direction to the pound.