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

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

The NZD is the strongest and the JPY is the weakest as the North American session begins. The USD is lower as traders from the President's Day holiday on Monday return from work.

ASB has revised its forecast for the Reserve Bank of New Zealand (RBNZ), suggesting that a rate hike in the upcoming week is a real possibility. This marks a significant shift from their previous prediction, which anticipated a rate cut in August. ASB now expects the RBNZ to cut rates in November, delaying their earlier projection.

Overnight, The People's Bank of China (PBOC) announced an interest rate cut, specifically targeting the 5-year Loan Prime Rate (LPR), which was reduced from 4.20% to 3.95%, marking a 25 basis point (bp) reduction. This adjustment is notable as it represents the largest cut ever to the 5-year LPR. The 1-year LPR remained unchanged at 3.45%. This move is particularly significant as the 5-year rate influences mortgage rates, potentially offering relief to China's struggling property sector. This reduction in the 5-year LPR, the first since August when it was trimmed by only 10bp, was anticipated, although the magnitude of the cut (25bp) was unexpected.

Snippet from ING in their response to the cut, noting a few firsts:

• Given the RMB depreciation pressure amid unfavourable interest rate spreads, we saw limited room for manoeuvre before global central banks shifted toward rate cuts.
• While single-sided LPR cuts have occured in the past, it was always the 1-year rate that was cut while the 5-year rate was maintained.
• The February decision was the first time since the LPR came into use in 2019 that the PBOC cut the 5-year LPR while keeping the 1-year LPR unchanged.
• The 25bp cut was also the largest cut to the 5-year LPR on record.

And, ING looks ahead:

• With inflation low and economic momentum still tepid in early 2024, we believe that monetary policy will remain accommodative in China moving forward. We still see room for one more cut to the key 1-year LPR in near term, and a further reserve ratio requirement cut is possible as well. If global central banks do begin rate cuts later in the year, that will likely free up more room for the PBoC to ease policy further.

In the UK, the BOE Treasury select hearing had various comments from BOE members. The GBPUSD today traded above and below the 1.2600 level, but below the 100 bar MA on the 4-hour chart above at 1.2625 (and moving lower) and above the flat 200 day MA at 1.25635.  The GBP overall is mixed to lower in trading with declines vs the EUR, AUD and NZD, leading the way lower. The GBP is higher vs the USD and JPY:

BoE Governor Bailey

• Governor Bailey has indicated his comfort with the market's interest rate projections, which suggest potential rate cuts, though he did not provide specifics on timing or magnitude. He emphasized that while the market expects rate cuts this year, the Bank of England (BoE) neither endorses nor finds it unreasonable to think along those lines. Bailey highlighted the economy's current state of full employment and signs of an upturn, noting the focus on making sustained progress in reducing persistent inflation elements. He mentioned that the BoE is observing adjustments in pay growth aligning with lower headline inflation and stressed that the BoE's primary target is inflation control, not fostering growth. He clarified that rate cuts could be considered even if inflation has not returned to the target, indicating a nuanced approach to monetary policy adjustments based on broader economic indicators.

BoE's Greene

• Greene expressed cautious optimism about wage growth moving towards the CPI target, albeit still at levels higher than desired. She also voiced concerns about the risks associated with prematurely cutting rates, which could necessitate a reversal of policy if done too hastily.

BoE's Broadbent

• Deputy Governor Broadbent shared insights on the shift in policy focus from the degree of restrictiveness to its duration, given the uncertain economic landscape. He suggested that the more persistent inflation components, like services and wages, may have peaked, hinting at a potential easing of inflationary pressures. However, he pointed out that the current wage growth and services inflation rates are twice as high as those consistent with sustainable CPI inflation, indicating ongoing challenges in achieving inflation targets. Broadbent did not dismiss the possibility of policy easing within the year but emphasized that any decision on rate adjustments would depend on the actual evolution of economic data.

US stocks markets are lower in pre-market trading.  US yields are also lower.  Both markets were closed yesterday due to the holiday.

Looking at the earnings released today:

Walmart Inc (WMT) 04 2024 (USD):

• Adj. EPS: 1.80 (BEAT expectations of 1.65)
• Revenue: 173.4 billion (BEAT expectations of 170.71 billion)

Fluor Corp (FLR) 04 2023 (USD):

• EPS: 0.68 (BEAT expectations of 0.57)
• Revenue: 3.80 billion (MISSED expectations of 4.11 billion)

Medtronic PLC (MDT) 03 2023 (USD):

• EPS: 1.30 (BEAT expectations of 1.26)
• Revenue: 8.1 billion (BEAT expectations of 7.95 billion)

Home Depot Inc (HD) 04 2023 (USD):

• Basic EPS: 2.83 (BEAT expectations of 2.77)
• Revenue: 34.786 billion (BEAT expectations of 34.64 billion)

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

• Crude oil is trading down -$0.95 or -1.21% at $77.51. At this time on Friday., the price was trading at $76.96.
• Gold is trading up $8.77 or 0.44% at $2026.59. At this time on Friday, the price was trading at $2007.28.
• Silver is trading up $0.11 or 0.50% at $23.10. At this time on Friday, the price was trading at $22.97.
• Bitcoin trades at $52,211. At this time on Friday, the price was trading at $52,331.

In the premarket, the US stocks are lower after falling on Friday. The major indices snapped their five-week winning streaks last week:

• Dow Industrial Average futures are implying a decline of -133 points. On Friday, the index felt -145.13 points or -0.37% at 38628.00. The index fell -0.11 but % last week
• S&P futures are implying a loss of -16.58 points points. On Friday, the index fell -24.16 points or -0.48% at 5005.56. The index fell -0.42% last week.
• Nasdaq futures are implying a loss of 86.01 points. On Friday the index fell -130.52 points or -0.82% at 15775.65. The index fell -1.34% last week

In the European equity markets, the major indices are trading mixed:

• German DAX, -0.12%.
• France CAC +0.27%.
• UK FTSE 100, +0.22%.
• Spain's Ibex, +0.71%.
• Italy's FTSE MIB, +0.24% (delayed by 10 minutes).

Shares in the Asian Pacific markets were higher (China closed):

• Japan's Nikkei 225, -0.28%.
• China's Shanghai composite index rose 0.42%.
• Hong Kong's Hang Seng index, rose 0.57%..
• Australia S&P/ASX, -0.08%.

Looking at the US debt market, yields are moving higher.

• 2-year yield 4.605%, -5.0 basis points. At this time yesterday, the yield was at 4.62%.
• 5-year yield 4.252%, -3.6 basis points. At this time yesterday, the yield was at 4.264%.
• 10-year yield 4.277%, -1.8 basis points. At this time yesterday, the yield was at 4.273%.
• 30-year yield 4.448%, -0.5 basis points. At this time yesterday, the yield was at 4.438%.
• The 2-10 year spread is at -32.5 basis points. At this time yesterday, the spread was at - 32.5 basis points
• The 2-30 year spread is at -15.6 basis points. At this time yesterday, the spread was at -15.6 basis points.

European benchmark 10-year yields are showing:

• Walmart Inc (WMT) 04 2024 (USD):

  • Adj. EPS: 1.80 (BEAT expectations of 1.65)
  • Revenue: 173.4 billion (BEAT expectations of 170.71 billion)

• Fluor Corp (FLR) 04 2023 (USD):

  • EPS: 0.68 (BEAT expectations of 0.57)
  • Revenue: 3.80 billion (MISSED expectations of 4.11 billion)

• Medtronic PLC (MDT) 03 2023 (USD):

  • EPS: 1.30 (BEAT expectations of 1.26)
  • Revenue: 8.1 billion (BEAT expectations of 7.95 billion)

• Home Depot Inc (HD) 04 2023 (USD):

  • Basic EPS: 2.83 (BEAT expectations of 2.77)
  • Revenue: 34.786 billion (BEAT expectations of 34.64 billion)

                This article was written by Greg Michalowski at www.forexlive.com.

Source: The NZD is the strongest and the JPY is the weakest as the NA session begins

forexlive.com