The Morning Update

Wednesday March 27th, 2024

Written by:
Paul Harrison

The USD is flat, oil prices weaken, equity markets are mixed, and US yields in quiet markets ahead of crucial inflation and growth data later in the week. Currency markets are steady, and equity markets consolidate as investors look for fresh data to guide the central bank's policy. Investors continue to focus on Thursday's UK GDP, German retail sales, US GDP, Friday's PCE, and Fed Chair Powell's comments to provide risk sentiment heading in April. Currency markets have been focused on the Bank of Japan and the prospect of intervention after the JPY hit a 34-year high. At the same time, Japan's Nikkei 225 Index shares closed close to their all-time high. Elsewhere, oil prices eased after an industry report highlighted a build-up in US inventories. Bitcoin eases to $70k off Tuesday's record high. Gold prices edge high towards $2,200. Today sees a light economic calendar, so markets will focus on ECB's Elderson and Fed's Waller to help direct markets intraday.

In other news. XI meets US CEOs as businesses seek to mend China ties. Search suspended for missing people in Baltimore bridge collapse. Russia struggles to collect oil payments as China, UAE, and Turkey are wary of US secondary sanctions. Thousands protest against Hungary's Orban after former inside leaks graft case tape. Belgian farmers block the EU district when ministers meet. S&P Global downgrades outlooks on five regional US banks to 'negative.' China's Country Garden hires Kroll to carry out liquidation analysis. Ontario delays balancing the budget by another year as the deficit grows. Robert Kennedy Jr picks California lawyer Nicole Shanahan as his running mate.

In currency markets. JPY retreats from 34-year low after Japan says it may take 'decisive steps' gains the week yen. Markets increase speculation for future weakness for the CNY. AUD weakens as domestic inflation levels continue to ease. CNY and Asian currencies ease 0.15% on average vs USD. Trading currencies are mixed, with NOK weakening 0.25%, AUD & CHF down 0.1%, NZD, SEK & MXN are flat, and JPY & ZAR strengthening 0.25% vs. USD.

In commodity markets. Oil, Wheat & Natural Gas prices weakened by 0.65%, Gold prices strengthened by 0.7%, Silver prices firmed by 0.2%, Copper prices slipped by 0.3%, and Soybean prices eased by 0.5%.

CAD remains under pressure as the USD steadies, oil prices ease, and the BoC raises concerns about the domestic economy. Bank of Canada Senior Deputy Governor Rogers commented to a business audience in Nova Scotia, "I'm saying that it's an emergency—it's time to break the Glass." Rogers said businesses urgently need to boost investment to increase productivity, saying this would help insulate the economy against the threat of inflation. Investors will be focused on Thursday's CAD GDP for further clues of the economy's strength.

EURCAD inches higher but remains contained within a narrow trading range in March as investors remain focused on the US PCE for direction.

EUR continues to tread water in thin holiday markets as investors remain cautious ahead of the US PCE & the Fed Chair's comments on Friday. The euro remains within a relatively tight range as risk sentiment stalls, and markets are cautious ahead of Friday's key data release and central bank comments. Domestically, Spanish inflation held steady at 3.2%, while Retail Sales strengthened to 1.9% vs 0.5% in January. In Europe, the business climate, consumer confidence, and economic sentiment indicators met expectations and didn't impact the Euro today. Today's US economic calendar is light, so the focus will be on ECB and Fed officials to provide some guidance to currency markets.

GBPEUR holds steady as markets focus on Thursday's UK GDP & German Retail Sales and Unemployment to help provide direction.

GBP holds steady below 1.2650 as investors remain on the sidelines today due to the lack of key data releases. The pound has had a volatile March, which saw it tumble from 1.2893 to 1.2572, then steady below 1.2650 as we look to close out March. The pound faces pressure after the Bank of England took a more dovish tone on interest rates in 2024, even though the UK has the highest inflation levels amongst its peers. We expect the pound to hold within its current trading range today with a light US economic calendar as investors remain focused on Thursday's UK GDP and Friday's US PCE and Fed Chair comments.