On Israel TV, a senior Israeli official was cited as saying there will be a ’significant response‘.

It don’t think it was ever realistic to think that Israeli would let it end here. So now we wait for the response, and then the response to the response, etc.

If you want a silver lining here, at least he didn’t say ‚this is war‘.

Meanwhile, Israel plans to request an urgent meeting of the UN Security Council, the Israeli permanent representative to the organization told Russian’s Sputnik.

This article was written by Adam Button at www.forexlive.com.

• University of Michigan consumer sentiment 77.9 vs 79.0 estimate
• Reports of 30-50 missiles launched from Lebanon at Israel
• Sen Rubio: „Barring some last-minute development, Iran is going to attack Israel“
• Fed’s Bostic: Inflation will keep easing but slower than we would like
• Fed’s Daly: There is absolutely no urgency to adjust policy rate
• KC Fed President Schmid: Current stance of US monetary policy is appropriate
• Fed’s Schmid Q&A: We’re at a bumpy stage now with inflation
• Chicago Fed Pres. Goolsbee: US is in an environment of „cross currents“
• WSJ Timiraos: Core PCE probably rose 0.27% in March according to forecasters
• Feds Collins: Inflation will come down even with a healthy labor market,but will take time
• US military deployed a missile ship with advanced defense capabilities near Israel
• US import prices for March rose 0.4% versus 0.3% expected

Markets:

• Gold down $30 to $2342
• WTI crude oil up 52-cents to $85.54
• US 10-year yields down 6.3 bps to 4.51%
• S&P 500 down 1.5%
• JPY leads, AUD lags

What has me rattled is the warning from Senator Marco Rubio about how Iran will attack Israel „barring some last minute development.“ During the first minutes of Russia’s war in Ukraine, Rubio was live-tweeting what Russia was doing and planned to do in extreme detail. This indicates that he’s privy to the highest levels of US intel and his comments certainly made the market nervous.

What had been moderate worry turned into full-scale fear in the equity market with the Nasdaq down 2%. The US dollar also climbed broadly and US 10-year yields slid.

However late in the day, Hezbollah launched a mild rocket attack against Israel and the market breathed something of a sigh of relief, thinking that maybe that was it. Still, the market is on edge and we will have to see what the weekend or next week brings.

Gold was caught up in the drama as it rose to a record high but as risk sentiment worsened a round of profit taking turned into a $100 drop, leaving a nasty reversal on the chart. Eyes will be on the ever-present buyers in China at the Monday open, to see if they buy the dip once again.

This article was written by Adam Button at www.forexlive.com.

The mood was poor to start the day but significantly darkened on credible talk of an imminent direct Iran attack on the US. The question is: Was the Hezbollah rocket attack it? Not many traders wanted to buy the dip late on anticipation that Iran will refrain from striking back too forcefully.

Geopolitics are tough to predict but here’s to a peaceful weekend.

Closing changes on the day:

• S&P 500 -1.5%
• Nasdaq Comp -1.6%
• DJIA -1.3%
• Russell 2000 -2.2%
• Toronto TSX Comp -1.1%

On the week:

• S&P 500 -1.6%
• Nasdaq Comp -0.5%
• DJIA -2.4%
• Russell 2000 -2.2%
• Toronto TSX Comp -1.6%

This article was written by Adam Button at www.forexlive.com.

• Labor market is strong, inflation is not falling as rapidly as last year
• With this week’s CPI report, it’s a good time to remind people the Fed is not data-point dependent
• I need to be fully confident inflation is coming down to 2% before considering a rate cut
• There’s a lot of work to do before we can be confident
• There’s too much discussion of how many rate cuts, rather than what we are trying to accomplish

The market is pricing in a 68% chance of a cut in July. We will need a turn lower in inflation data if that’s going to happen.

This article was written by Adam Button at www.forexlive.com.

„My expectation is sooner than later,“ Biden said when asked how imminent an attack by Iran on Israel was.

„We are devoted to the defense of Israel. We will support Israel, we will defend–help defend Israel and Iran will not succeed,“ he also said.

The market has priced out some of the worries but we won’t find out how much angst is in the market unless nothing happens on the weekend. So it goes with macro trading.

This article was written by Adam Button at www.forexlive.com.

The Australian dollar is nearing the February low of 0.6443 as it rests just 14 pips above. AUD/USD traded as high as 0.6644 on Tuesday but traded down sharply on the hot US CPI report and has continued lower today as the dollar breaks higher against a number of currencies.

Though much of the move is broad USD strength, the Australian dollar is particularly soft accounting to broader risk aversion. It’s not benefiting from higher metals prices and improving China growth prospects but those are notable themes to watch.

Ominously, both CAD and NZD are trading at the lowest levels since November. The commodity-driven trio tend to trade together so it may be a struggle for AUD to hold the Feb low. If it breaks, the November low was 0.6339 and the October low was 0.6270.

This article was written by Adam Button at www.forexlive.com.

Headlines:

BoJ Quarterly Survey Shows Households Pessimistic on Inflation

German CPI m/m 0.4% vs 0.4% expected

U.K. GDP m/m 0.1 vs 0.1% expected

ECB’s Stournaras Supports Divergence from the Fed’s Policies

French CPI m/m 0.2 vs 0.2% expected

Spanish CPI m/m 0.8% vs 0.8% expected

USD/JPY hits highest level since mid-1990 at 153.34

ECB’s Muller says Slower Inflation Rises the Chances of a June Rate Cut

ECB survey shows inflation expectations unchanged across all horizons.

Fed Collins: Rate Hike not Part of Baseline but Not Fully Ruled Out

Markets:

The Dollar continued its strengthening during the European session, but a correction is likely.

Crude oil also rises due to geopolitical events.

Gold reached record highs.

USD/JPY trading near 153.30.

European bourses were in the green today.

This article was written by Gina Constantin at www.forexlive.com.

Former Fed Chair Bernanke’s recommendations:

BoE should de-emphasise the central forecast based on market interest rate expectations.

Fan charts should be eliminated and uncertainty conveyed in a more qualitative way.

Central forecasts should be augmented with topical scenarios.

Bank of England’s main forecast model should be replaced or thoroughly revamped.

Incremental quarterly updates to BoE forecasts may slow recognition of bigger structural changes.

This article was written by Gina Constantin at www.forexlive.com.

Prior 8.7%.

New Loans 3,090.0B vs 3,700.0B expected; prior 1,450.0 trillion yuan ($201.5 billion).

Outstanding Loan Growth y/y 9.6% vs 9.9% expected; prior 10.1%.

Chinese Total Social Financing 4,870.0B vs 4,700.0B expected; prior 1,560.0B.

This article was written by Gina Constantin at www.forexlive.com.

USD

• The Fed left interest rates unchanged as expected at the last meeting with basically no
  change to the statement. The Dot Plot still showed three rate cuts for 2024 and
  the economic projections were upgraded with growth and inflation higher and the
  unemployment rate lower.
• The US CPI beat expectations for the third
  consecutive month, while the US PPI came in line with forecasts.
• The US NFP beat expectations across the board
  although the average hourly earnings came in line with forecasts.
• The US ISM Manufacturing PMI beat expectations by a big margin with
  the prices component continuing to increase, while the US ISM Services PMI missed with the price index dropping to
  the lowest level in 4 years.
• The market now expects the first rate cut in
  September.

AUD

• The
  RBA left interest rates unchanged as expected at the last meeting and
  finally dropped the tightening bias.
• The
  last Monthly CPI report came in line with
  expectations although the underlying inflation measure increased from the prior
  month.
• The
  latest labour market report missed expectations by a big
  margin.
• The
  wage price index surprised to the upside as wage
  growth in Australia remains strong.
• The
  latest Australian PMIs showed the Manufacturing PMI falling
  further into contraction while the Services PMI continue to increase and remain
  in expansion.
• The
  market expects the first rate cut in August.

AUDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that AUDUSD got
rejected by the key 0.6623 resistance and sold
off all the way back to the key support zone around the 0.65 handle. Today the
price broke down and the sellers are now targeting the 0.6443 low. That’s where
we will likely find the buyers stepping in with a defined risk below the level
to position for a rally back into the 0.6623 resistance.

AUDUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price
yesterday bounced on the 0.65 support zone but got rejected by the minor
resistance zone around the 0.6550 level where we had also the 38.2% Fibonacci retracement level
for confluence. The
sellers stepped in with a defined risk above the zone to position for a drop
into the 0.6443 low and increase the bearish bets as soon as the price broke
down. The buyers might try to step in around the recent low at 0.6480, although
the 0.6443 level looks much better from a risk management perspective.

AUDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price is starting to diverge
with the MACD
as it approaches the 0.6480 low. This is generally a sign of weakening momentum
often followed by pullbacks or reversals. In this case, it might be a signal
for a bounce on the low, but the sellers will likely sell an eventual rally
into the trendline to position for a break into new lows.

Upcoming Events

Today we conclude the week with the University of
Michigan Consumer Sentiment Survey.

This article was written by FL Contributors at www.forexlive.com.