The JPY is the strongest and the AUD is the weakest as the NA session begins

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The strongest to the weakest of the major currencies

As the North American session begins, the JPY is the strongest and the AUD is the weakest. The USD is battling with the JPY as the strongest.

Central banks have been key this week. The Bank of Japan raised rates, and the JPY moves lower (hmmm). However, the ceiling between 151.91 (high from 2023) to 151.945 (high from 2023) remains as a “governor” to the upside speed for the pair. The high price today did extend to a new 2024 high 151.85, and moved lower. Traders are leaning.

The SNB went the other way and cut rates by 25 basis points, surprising the market. It continued its run to the upside today trading at the highest level since November 14.

The Fed and the Bank of England kept rates unchanged with the market interpreting “a go” for cuts later this year. The Fed kept 3 cuts in play for 2024 in their dot plot. The USD moved lower at first (they were the first to announce this week), but the USD has been the strongest over the last two days helped by stronger data and weakness abroad (technicals have helped as well).

The RBA kept rates unchanged, and then employment came in stronger on Thursday, sending the AUDUSD higher. However, the focus shifted and reversed lower with the USDs rise the last two days.

Staying on the central banks, the leaders have been speaking today:

Bank of England Governor Bailey expressed that market expectations for rate cuts within the year are rational, given the trajectory of inflation. He noted that the technical recession anticipated at the end of 2023 is showing signs of easing, and while optimistic about recent economic improvements, he emphasized the need for consistent progress towards the inflation target before considering rate reductions. Bailey confirmed that contemplating rate cuts in 2023 aligns with the Bank’s outlook, mentioning in his comments to the Financial Times that each meeting presents an opportunity for new decisions, highlighting the importance of wage trends aligning favorably. He clarified that the BOE does not require inflation to reach the 2% target before initiating rate cuts, acknowledging that recent economic developments are positive but reminding that the effort to control inflation is ongoing and not yet complete.

In the EU, ECB President Christine Lagarde, speaking at the Euro Summit in Brussels, indicated that inflation is anticipated to keep decreasing. She highlighted that economic growth is expected to accelerate throughout the year, fueled largely by a rise in purchasing power. Lagarde stressed the importance of enhancing productivity through greater capital investment for economic resilience. She emphasized the critical role of the Capital Markets Union in achieving this goal, underscoring its significance in the broader strategy to strengthen the EU’s economic foundation.

ECB policymaker Joachim Nagel stated that the likelihood of a rate cut before the summer break is rising, with a June rate cut being more probable than one in April. He emphasized that rate cuts are not automatic and depend on the economic conditions at the time.

ECB policymaker Robert Holzmann mentioned that a rate cut is being prepared, although the exact timing remains uncertain, as decisions will be data-dependent. While some anticipate that conditions in June might allow for a rate cut, Holzmann expressed caution, noting his view that inflation may be more persistent than others anticipate, indicating a desire to wait for June data before making a decision.

Today, we get to hear from Fed’s Powell two days after the FOMC rate decision and his press conference. The market hitched onto the 3 cuts in 2024 dot plot, taking stocks higher and to record levels. For the week, the US 10 year is down -7.1 basis points and the 2 year is down by a greater -12.0 basis points.

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

  • Crude oil is trading up eight cents or 0.10% at $81.15. At this time yesterday, the price was at $80.76
  • Gold is trading down -$13.85 or -0.63% at $2167. At this time yesterday, the price was at $2207.54
  • Silver is trading down $-0.11 or -0.46% at $24.58. At this time yesterday, the price was at $5.42
  • Bitcoin currently trades at $64,785. The low price yesterday reached $64,537. At this time yesterday, the price was trading at $67,025. The all-time high price reached last week reached $73,794. The high price today reached $66,631.

In the premarket, the major indices are trading lower today after all three indices closed at record levels yesterday (again):

  • Dow Industrial Average futures are implying a decline of -20 points. Yesterday the index rose 269.24 or 0.68% at 39781.38
  • S&P futures are implying a decline of -7.3 points. Yesterday, the index rose 16.91 points or 0.12% at 5241.54. The S&P closed at a record level for the 20th time this year.
  • Nasdaq futures are implying a delien of -49 points. Yesterday, the index rose 32.43 points or 0.20% at 16401.84

In the European equity markets, the major indices are trading mostly higher.

  • German DAX, +0.06%
  • France CAC , -0.24%
  • UK FTSE 100, +0.67%
  • Spain’s Ibex, +0.67%
  • Italy’s FTSE MIB, +0.08% (delayed by 10 minutes).

Shares in the Asian Pacific markets were mostly higher:

  • Japan’s Nikkei 225, +0.18%
  • China’s Shanghai Composite Index, -0.5%
  • Hong Kong’s Hang Seng index, -2.16%
  • Australia S&P/ASX index, -0.15%

Looking at the US debt market, yields are lower:

  • 2-year yield 4.614%, -1.7 basis points. At this time yesterday, the yield was at 4.566%
  • 5-year yield 4.226%, -0.27 basis points. At this time yesterday, the yield was at 4.192%
  • 10-year yield 4.241%, -3.0 basis points. At this time yesterday, the yield was at 4.221%
  • 30-year yield 4.411%, -3.0 basis points. At this time yesterday, the yield was at 4.410%

Looking at the treasury yield curve spreads:

  • The 2-10 year spread is at – 37.4 basis points. At this time yesterday, the spread was at – 34.4 basis points
  • The 2-30 year spread is at – 20.3 basis points. At this time yesterday, the spread was at – 15.4 basis points

European benchmark 10-year yields are lower:

The European 10 year yields are mostly lower

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