Tuesday, April 5: Five things the markets speak of
exchange volumes across the different asset classes are lower than usual volatility is non descript, but the brewing while the "strong" dollar remains fairly contained for now after openly "status quo" position of the Fed Yellen in late March.
With investors continuing to hunt a clear directional piece maybe they should wait for the Fed (Wednesday) and ECB (Thursday) respectively to publish the minutes of their latest meeting policy for a stronger condemnation?
Currently, global equities are struggling to find traction, crude prices remain suspects before the Doha meeting (April 17), restore the overall yields late last week gains (10 US + 1.775%), while the rise in 'risk aversion' trade sees the yen at its strongest level this year - ¥ 110 handle JPY has not been violated since the surprise BoJ easing in October 2014, which expanded the annual monetary base + ¥ 80T
1. Sophisticated investors
Boston Fed President Rosengren hit a tone somewhat "hawkish" than usual yesterday. Rosengren stressed that the gap between the outlook and the Fed's market expectations significantly expanded, and he believes that the market was wrong.
The market has interpreted About Yellen last week as openly "status quo", delete the most hawkish comments from the year of another recent Fed speaker to date. This continues to penalize the "powerful" US dollar as investors unwind the premium of the currency rate differential, while flattening US yield curve (market is pricing in one, possibly two rate hikes this year . Back in December, "dot plot" the Fed suggested four rate hike in 2016)
Rosengren -. an FOMC voter in 2016 - believes "that financial markets may have reacted too strongly." His assessment is that the US economy continues to improve despite headwinds from abroad. "If my prediction is correct, it may involve several increases in short-term interest rates that are currently priced on futures markets."
Fed-funds are currently showing 26% chance of higher rates in June and 66% for December. - suggesting that many expect the Fed to tighten again in 2016, if any (the yield of US 10 is now at 1.783%)
2. Reserve Bank of Australia (RBA) keeps rates on hold
as expected, the RBA kept interest rates on hold Tuesday ( + 2%), but returns to jawboning the Australian dollar down (0.7557 a $).
new governor Stevens said the recent rise in AUD (up 7% in Mars) could complicate a recovery in their economies. Steven suggests that decisions taken by other central banks to lower interest rates have contributed to the rise of the AUD, as has too increased prices raw materials.
Aside from the RBA withdraw the reference from the previous statement of "financial turmoil threatening weakening global and domestic demand," the statement this morning was largely unchanged, reiterating that the growth rate China continued to moderate and that inflation would remain low Aussie over the next year or two.
3. Yen moving
overnight, Japan saw surprisingly strong demand in the auction of their JGB 10 years, despite the negative returns for the second consecutive month.
in addition, as speculated, government officials announced details of their FY2016 budget frontloading / 17, with + 80% of infrastructure spending planned for the period from April to September
Kuroda BoJ continues to defend QQE ( qualitative and quantitative monetary easing), showing the decline of oil prices as the main reason for the low inflation and adding that technically "it is possible to push interest rates into negative territory. "Note, however, traders are paring their expectations of larger rate cuts from the reserves, and the testimony of Kuroda seems to have influenced this view that JPY continues to rally (¥ 110.42).
Many are now speculating that the BOJ may be forced to downgrade again their inflation expectations later this month, after Tankan survey yesterday cut its inflation forecast for the 1-, 3- and 5 years.
4. Reserve Bank of India (RBI) cut rates as expected
as expected, Reserve bank of India announced its widely expected easing of monetary policy. the cut -0.25% was predicted by many, because the conditions were ripe for additional stimulus by the central bank.
analysts note the government of Modi exercised "fiscal prudence in its latest budget review, while consumer inflation levels have recently declined."
Both the currency (USD / 66.07 INR) and pets market seemed impressed by the marginal easing of borrowing costs, likely because the magnitude of the rate cut was already priced-in.
5. eurozone lower than indicated last month
Earlier this morning, missed expectations Euro PMI services to highlight the persistent fragility of the recovery of the regions.
months preliminary estimate of activity in manufacturing and services showed a revival that Q1 was ending. But the final Markit composite PMI released this morning, paints a different picture - Euro Q1 activity grew at its slowest pace since Q4 2014.
The survey also confirms that Draghi ECB continues to face an uphill battle to raise the inflation rate to the level of the desired 2% CB - March CPI was -0.1% lower than a year earlier, despite the Euro companies slashing prices for the sixth consecutive month
all things are not bad for. region. Other data showed that retail sales rose for the fourth consecutive month in February (+ 0.2%) -. Many had been projecting a slight decline m / m
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