The USD remains steady, oil prices edged higher, equity markets are up, and US yields ease ahead of the US inflation report. Currency markets remain sidelined, while equity markets stage a rebound buoyed by bullish news in the tech sector and stronger commodity prices. In the bigger picture, global equities appear to be struggling to build on Q1's best performance since 2019, as expectations of a Fed easing slip on the back of the resilient US economy. Economists forecast that the US CPI will rise to 0.3% m/m in March (Feb 0.4%), while y/y in March will increase to 3.4% (Feb 3.2%). Julien Lafargue, Barclays Private Bank, said, "Markets seem poised for an inflation figure that may exceed expectations as odds of a June cut have decreased." Elsewhere, New Zealand kept its interest rates on hold at 5.5%. Copper prices extend gains to $9.5k a ton amid supply risk, up 10% in 2024. Gold holds at record highs, Iron Ore prices steady near two-week highs, and oil prices steady after easing on gains in US crude stockpiles. Market focus today: The US CPI report, FOMC Minutes, monthly budget statement, and Fed's Goolsbeen speech. In Canada, the BoC Interest Rate Decision and the BoC Press Conference.
In other news. Fitch cuts China's credit outlook to negative, based on 'uncertain economic prospects.' Biden says Netanyahu's approach to the war in Gaza is a 'mistake.' The US sends seized Iranian weapons to Ukraine. Floods swamp scores of settlements in Russia and Kazakhstan. The EU court took Russian oligarchs Fridman and Aven off the sanctions list. Ukraine races to fix and shield its power plants after Russian onslaught. Economists expect another interest rate pause from the BoC. After issuing a factory capacity warning to China, Yellen faces tariff decisions. China's EV export boom fuels the surge in demand for new car-carrying ships. Boeing has been hit with whistleblower allegations, which have added to safety concerns. According to sources, Hong Kong is set to approve its first spot bitcoin ETFs in April.
In currency markets. The USD remains sidelined as markets await today's US CPI report. JPY remains under pressure, stalling below the critical 152 level compared to USD. NZD gains after its central bank kept interest rates on hold. CNY and Asian currencies, on average, are flat vs. USD. Trading currencies are mixed with ZAR weakening by 0.4%, AUD & JPY down by 0.1%, while CHF is flat, NOK & SEK firmed by 0.1%, NZD firms by 0.2%, and MXN strengthening by 0.4% vs USD.
In commodity markets. Oil and soybean prices rose by 0.35%, natural gas prices rallied by 2%, gold prices rose by 0.1%, silver and copper prices firmed by 0.7%, and wheat prices strengthened by 1.1%.
CAD remains under pressure compared to its peers ahead of a possible dovish shift by the Bank of Canada. The BoC is expected to hold its key interest rates at today's meeting. Still, expectation is growing that the statement will take a more dovish tone with increasing unemployment levels and easing inflation pressures. If we see a US inflation report print higher than expected and the BoC takes a more dovish tone, we could see the CAD retest of 1.3650 levels.
EURCAD holds steady at April highs ahead of the Bank of Canada interest rate decision.
EUR holds onto 1.0850 levels as markets remain sidelined ahead of the US inflation report. The USD continues consolidating as markets focus on several crucial US data releases and more Fed speeches. Domestically, we saw no market reaction after Italian retail sales slipped m/m in February, strengthening to 2.4% y/y vs 1%. Today, the US CPI, Fed Minutes, and Fed official comments will be the primary driver for currency markets.
GBPEUR continues to rise as expectations persist that the ECB could ease domestic interest rates, while the boE is expected to keep rates on hold until Q3.
GBP breaks through 1.2700 heading into today's US inflation report. The pound is resting the April highs a, a combination of US dollar weakness and an improvement in risk sentiment. Domestically, the focus will be on Friday's BoE's Greene speech, UK GDP, Industrial Production, and Manufacturing Production to provide insight into the UK economy. Intraday, the US inflation figures, and the Fed Minutes will be the primary drivers of market volatility.
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