The Morning Update

Monday March 25th, 2024

Written by:
Paul Harrison

The USD strengthens, oil prices firm, equity markets are mixed, and US yields rise, heading into a shortened trading week. The USD extends gains supported by higher US yields. Equity markets pause following nine straight weeks of gains as investors focus on corporate earnings and critical data from the US in a shortened trading week ahead of the Easter holidays. Premier Li Qiang downplayed investor concerns over economic challenges in China, saying Beijing was stepping up policy support to spur growth and that systemic risks were being addressed. Elsewhere, oil prices advanced following the attacks in Russia. Gold prices remain steady, while iron ore prices hold onto its largest weekly gain in six months. This week's focus is Monday's US New Home Sales, with Speeches from Fed's Bostic, Mann, and Cook. Tuesday, Spanish GDP, US Durable Goods Orders, Consumer Confidence. Wednesday, EUR Business Climate, Consumer Confidence, Economic Sentiment Indicator. Thursday, UK GDP, CAD GDP, US GDP, Continuing Jobless Claims, Core PCE, Initial Jobless Claims, and Pending Home Sales. Friday, Good Friday Holiday across Europe & Canada.

In other news. Apple, Google, and Meta are among the first tech companies to be probed under the EU's new Digital Market Act. The US & Japan plan their biggest upgrade to security pact in over 60 years. Baltic leaders urge NATO members to bring back conscription. Boeing's largest union seeks a seat on the plane maker's board. Malaysia's inflation has accelerated for the first time since August 2022. President Biden signs a $ 1.2 trillion spending package for government funding until October. Apple will launch Vision Pro in China this year, Tim Cook says. Suspects in Moscow concert terror attack appear in court; Kyiv rocked by explosions.

In currency markets. Japan warns speculators behind the weak JPY, saying it is ready to take action. CNY strengthens on strong government guidance and state banks selling USD. The pound holds near one-month lows on increasing BoE rate cut speculation. CNY strengthened 0.25%, while Asian currencies firmed 0.15% on average vs USD. Trading currencies are mixed, with SEK weakening by 0.25%, JPY, CHF, NOK & MXN flat, AUD, ZAR & NZD firmed by 0.15% vs USD.

In commodity markets, oil prices strengthened by 0.7%. Natural Gas prices tumbled by 2%. Gold Prices gained by 0.4%. Silver and Soybean prices are up by 0.1%, Copper prices firmed by 0.25%, and Wheat prices rallied by 1.95%.

CAD holds near 1.3600 as markets focus on CAD's GDP data on Thursday following last week's weak domestic retail sales data. The data showed evidence of an economic slowdown and increased speculation that the BoC could lower interest rates possibly as soon as June. Money Markets raised bets that the BoC could ease in June to roughly 70% after the Canadian inflation levels cooled to an annual rate of 2.8%. Today, we see a light CAD & US economic calendar, so the focus will be on the Fed speakers to help provide intraday direction to the loonie.

EURCAD continues to trade within the tight 1.4690-1.4740 range as markets anticipate both the ECB & BoC could cut interest rates in June.

EUR holds above 1.0800 in quiet trading amid a light economic calendar. The approaching Easter holidays and a light economic calendar have kept investors on the sidelines, and the Euro remains within a tight trading range. We are not expecting any surprises from Fed or ECB speakers today, so we anticipate the euro will remain in a tight trading range today.

GBPEUR edges off Friday's lows but is expected to be contained ahead of Thursday's UK GDP.

GBP trades slightly higher off one-month lows but remains capped on BoE rate cut bets. The pound remains on the back foot after investors ramped up bets that the BoE could cut interest rates as early as June. Investor sentiment changed after dovish comments from BoE policymakers saying that domestic inflation levels are moving in the right direction for interest rate cuts. This week, investors will focus on the FPC Meeting Minutes on Wednesday and the UK GDP on Thursday to help guide the pound.