The GBP is the strongst and the AUD is the weakest as the NA session begins

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As the North American session begins, the GBP is the strongest of the major currencies, while the AUD is the weakest. The USD is modestly higher with the greenback lower verse the GBP (-0.40%). It is unchanged versus the EUR.

Pushing the GBP higher was higher than expected inflation. UK CPI YoY came in stronger at 4.0% vs. 3.8% estimate (3.9% last month), and core YoY 5.1% vs 4.9% estimate (5.1% last month). EU final CPI data came in as expected at 2.9% YoY for headline and 3.4% for the core.

US stocks are tilting to the downside in pre-market futures trading. The major indices moved lower yesterday as yields moved higher after Fed’s Waller said the economy is doing well and the Fed does not have to cut rates rapidly. Yields are mixed today with the shorter end higher. The 10 and 30 year yield are little changed of modestly lower.

Overnight, China GDP came in at 5.2% vs 5.3% estimate (up from 4.9%). For the year, GDP grew 5.2% on the year which was a bit stronger than the 5.0% estimate. Retail sales in China were also weaker than expected at 7.4% vs 7.9% YoY. Unemployment rate came in higher at 5.1% vs 5.0%. Remember, the numbers may seem good, but they are coming off the Covid restriction year where growth numbers were weaker.

The China data helped to pressure oil and keep the pressure on the commodity currencies. The AUDUSD did stall near the 200 day MA yesterday (a small break below the MA yesterday but the price snapped back in the early European session). The China data, helped to push the price lower and and away from the 200-day MA at 0.65806 (see chart below). The low from December is the next target near 0.65249. The 100 day MA is at 0.65095.

AUDUSD break below the 200 day MA

Looking at some central banker comments overnight. ECBS Panetta, Knot and Lagarde and consistent with comments yesterday, they feel the markets view of more cuts and more quickly is too aggressive (although they do see cuts.

ECB’s executive board member, Fabio Panetta, acknowledges that disinflation is occurring, characterizing it as strong and likely to persist. He emphasizes the need for monetary conditions to adapt, but stresses the importance of waiting for data to confirm the disinflation outlook before making any adjustments.

ECB policymaker Klaas Knot expresses caution regarding market expectations for rate cuts. He believes that a series of favorable conditions must materialize for inflation to reach the 2% target by 2025, including a turnaround in wages. Knot warns that any policy easing would be very gradual and suggests that the rate path anticipated by markets might be counterproductive. He indicates that the more the markets anticipate easing, the less likely the ECB is to actually implement rate cuts.

ECB President Christine Lagarde expresses confidence in achieving the 2% inflation target. She notes that while inflation isn’t currently where the ECB wants it to be, it is on the correct trajectory, although she cautions that there’s no cause for celebration yet. Lagarde also comments on the potential negative impact of overly optimistic market expectations in the fight against inflation. She hints at the likelihood of rate cuts by the summer.

In the US, the weekly mortgage data was released and showed:

US Mortgage Refinance Index:

  • Current week: 471.2
  • Previous week: 425.4

US MBA Purchase Index:

  • Current week: 162.2
  • Previous week: 148.6

US Mortgage Market Index:

  • Current week: 210.5
  • Previous week: 190.6

US MBA Mortgage Applications (week-over-week change):

  • Current week: +10.4%
  • Previous week: +9.9%

US MBA 30-Year Mortgage Rate:

  • Current week: 6.75%
  • Previous week: 6.81%

Retail sales in the US will be released at 8:30 AM ET with estimate of your .4% versus 0.3% last month. The court is expected to rise by 0.2%. Later at 9:15 AM ET, industrial production (-0.1% estimate versus -0.1%) and capacity utilization (78.7% estimate versus 38.8% last month) will be released. At 10 AM ET, business inventories (-0.1% estimate), and NAHB housing market index (estimate 39 versus 37 last month) will be released

A snapshot of the markets as the North American session begins currently shows:

  • Crude oil is trading down -$1.43 or -1.98% at $70.97 at this time yesterday, the price was at $73.01
  • Gold is trading down -$1.13 or -0.05% at $2027.08. At this time yesterday, it was trading at $2038.49
  • Silver is trading down nine cents or -0.40% at $20.81. At this time yesterday, it was trading at $23.02
  • Bitcoin traded at $22,722. At this time yesterday, the price was trading at $43,110

In the premarket for US stocks, the major indices are trading lower. Recall from Friday, the major indices closed mixed with the Dow Industrial Average down while the S&P and NASDAQ closed higher but were nearly unchanged

  • Dow Industrial Average futures are implying a decline of -120.25 points. Yesterday, the index fell -231.86 points or -0.62%
  • S&P futures are implying a decline of -16.98 points. Yesterday, the index fell -17.85 points or -0.37%
  • Nasdaq futures are implying a decline of -70.2 points. Yesterday, the index fell -28.41 points or -0.1%

In the European equity markets, the major indices are all trading lower:

  • German DAX, -0.92%. Yesterday, the index fell -0.30%
  • France CAC -1.05%. Yesterday, the index fell -0.18%
  • UK FTSE 100 -1.65%. Yesterday, the index fell -0.48%
  • Spain’s Ibex -1.30%. Yesterday, the index fell -0.1%
  • Italy’s FTSE MIB -1.05% (delayed by 10 minutes).

Shares in the Asian Pacific markets were mostly lower except the Shanghai composite index:

  • Japan’s Nikkei 225, -0.40%
  • China’s Shanghai composite index , -2.09%
  • Hong Kong’s Hang Seng index, -3.71%
  • Australia S&P/ASX, -0.29%

Looking at the US debt market, yields are trading mixed with the shorter paint higher in the water and a lower.

  • 2-year yield 4.282%, +5.5 basis points. Yesterday at this time, the yield was at 4.211%
  • 5-year yield 3.972% normal +2.8 basis points. Yesterday at this time, the yield was at 3.901%
  • 10-year yield 4.071%, +0.5 basis points. Yesterday at this time, the yield was at 4.004%
  • 30-year yield 4.25%, -0.9 basis points. Yesterday at this time, the yield was at 4.229%
  • The 2-10 year spread is at -21.2 basis points. At this time yesterday, the spread was at -20.6 basis points
  • The 2-30 year spread is at +1.3 basis points. At this time yesterday, the spread was at + 1.9 basis points

In the European debt market, the benchmark 10-year yields are higher:

European benchmark 10 year yields

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