What have markets priced in for the key central bank decisions this week? 0 (0)

  • RBA: 90% probability of no change, 10% probability of 25 bps rate hike (OIS)
  • Fed: 92% probability of 25 bps rate hike, 8% probability of no change (Fed funds futures)
  • ECB: 81% probability of 25 bps rate hike, 19% probability of 50 bps rate hike (€STR)

Among the three, it is only the ECB pricing that might shift around a little ahead of the Thursday decision. That will be dependent on what we see from the Eurozone CPI data tomorrow, as pointed out earlier here.

The RBA meanwhile will be a rather straightforward one, as they are widely expected to keep the cash rate unchanged. And they are also likely to deliver a similar communique to what we already saw last month.

As for the Fed, that is where things start to get interesting for broader markets. While a 25 bps rate hike is almost certainly a done deal, what comes next is still up in the air for the most part. Will the Fed stick with a higher for longer approach and narrative? Or will they acknowledge that the time is now here to call for a pause?

Whatever the case is, it will definitely have an impact on the Fed funds futures curve.

As things stand, traders are pricing in two rate cuts by year-end and that the Fed will pause after this week’s rate hike.

We shall see whether or not policymakers agree with that view and how Powell will communicate that when the time comes on Wednesday.

This article was written by Justin Low at www.forexlive.com.

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Dollar mostly firmer so far on the day 0 (0)

The dollar is sitting mostly higher on the day, with slight gains seen against the euro, pound and yen. Meanwhile, it is holding lower against the aussie with the RBA in focus tomorrow. EUR/USD is down 0.3% to 1.0990 and continues to hang in and around the 1.1000 mark for now:

Buyers are still hoping to try and secure a firm break above 1.1000 with the 2 February high at 1.1033 still proving to be an impediment when you look at the weekly chart. That seems to make clear how EUR/USD is still struggling for an upside break above the 1.1000 mark for the time being.

Meanwhile, GBP/USD is down 0.4% to 1.2520 and despite the weekly close and break above the 1.2500 mark, buyers are struggling a little to start the new week. A drop back below the figure level would be a massive blow to the momentum gathered on Friday.

Elsewhere, USD/JPY is sitting higher around 136.80 at the moment but off its earlier highs as buyers are contesting with key technical resistance from its 200-day moving average as highlighted here.

This article was written by Justin Low at www.forexlive.com.

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FMAS:23 Session Spotlight – Unlock Your Potential: Trade Your Way to The Top 0 (0)

In just one
week, the Finance Magnates Africa Summit (FMAS:23) will kick off, taking place
on May 8-10 in South Africa. As one of the biggest events of the year in
Africa, FMAS will represent a coming together of thousands of attendees,
leading brands, executives and more in Johannesburg, South Africa at the luxurious
Sandton Convention Centre.

With
less than two weeks to go until the big event, at attendees are encouraged to familiarize
themselves with the detailed agenda for FMAS:23. This includes the jam-packed schedule
of panels, fireside chats, sessions, workshops, and much more.

The full
agenda for FMAS:23 is already live and can be accessed by the following link. Overall, a
total of four industry verticals are being covered during FMAS:23, with the
online trading, payments, fintech, and blockchain & digital assets spaces
in focus.

Session
Powered by XM | Unlock Your Potential: Trade Your Way to The Top

Get ready to unlock your potential in forex trading in this
session ‚Trade your way to the top‘! powered by XM. The session’s expert panelists
have been there, done that, and are eager to share their best tips, tricks, and
strategies for success.

This will be the focus at one of the event’s most anticipated
fireside chats this May, Unlock Your Potential: Trade Your Way to The Top, taking
place on May 10,
11:40-12:10 at Centre Stage.

After
this discussion, you’ll become an expert in: Navigating market volatility Analyzing
technical and fundamental factors Managing risks like a pro Plus, you’ll hear
about the exciting rewards of forex trading, like the potential to earn big
profits and living YOUR LIFE on YOUR TERMS.

This fireside
chat will include the following talented speakers:

  • Avramis
    Despotis, Founder & CEO, Tradepedia
  • Reino
    Deetlefs, Chief Instructor – Africa, Tradepedia

According to Mr. Despotis and Mr. Deetlefs, “the
session will emphasize earning big returns on your investment year after year
is a challenging goal that requires careful planning and execution. The
highlight of this session will be the discussion on strategies that we use to
achieve this goal: using leverage, using active trading, using strict risk
controls, and automated tools.”

The
discussion will focus on the following topics: How to navigate market
volatility, analyzing technical and fundamental factors, and managing risks
like a pro.

In
addition, with the latest technology, trading platforms, and educational
resources at your fingertips, the session will help you turn your trading
dreams into reality. So, get inspired and motivated to seize the opportunities
of forex trading to achieve financial freedom. Don’t miss this chance to take
your trading game to the next level!

“At XM, we’re constantly looking for ways to enhance
our products and services. Attending events like FMAS:23 enables us to stay up
to date with industry developments and share our knowledge and expertise with
others in the industry. We’re looking forward to meeting peers, attending
thought-provoking sessions, and learning more about the unique challenges and
opportunities that the South African market presents, so that we can ultimately
provide our clients with the best possible trading experience,” explained Mr.
Despotis and Mr. Deetlefs.

FMAS:23 – The Largest Event in
Africa of the Year

FMAS:23
will no doubt be one of largest events in Africa, attracting premier speakers and
attendees. This includes upwards of 3000+ attendees, 70+ exhibitors, 100+
brokers, and 50+ speakers. These marquee individuals will be available to
discuss, engage, and network throughout FMAS:23.

Of
course, the aforementioned fireside chat is just one of several different
sessions available for attendees at FMAS:23. With such a diverse content track,
there is truly something for all attendees!

Join other
industry leaders, executives, brands, and traders to discuss the future of
trading on the continent, fintech opportunities, and much more.

FMAS:23 will
be attracting the biggest-name talent, noteworthy individuals, and the industry’s
leading brands. All attendees are encouraged to mingle and engage with each
other in what will be an unforgettable event.

See you
in Johannesburg this May!

This article was written by ForexLive at www.forexlive.com.

Go to Forexlive

Market Outlook for the Week of May 1-5 0 (0)

The week will start slow with
a holiday in Europe to observe Labor Day on Monday, but we’ll get some data
from the U.S., like the ISM Manufacturing PMI. On Tuesday, all eyes will be on
the RBA meeting and cash rate in Australia. Additionally, the U.S. JOLTS Job
Openings data will be released.

Moving to Wednesday, New Zealand
will release their employment change q/q and unemployment rate. The U.S. will
release the ADP Non-Farm Employment change and ISM Services PMI, followed by
the FOMC statement, Federal Funds Rate and FOMC press conference.

Thursday will bring the eurozone
main refinancing rate, monetary policy statement and the ECB press conference.
Finally, on Friday, Switzerland will release their CPI m/m data, while the U.S.
will release the average hourly earnings m/m, non-farm employment change and
the unemployment rate. Canada will also release their employment change and
unemployment rate data on Friday.

The U.S. ISM manufacturing PMI
and Services PMI will provide some clues about the business sector’s
performance in Q2 after a disappointing Q1 impacted by lower demand and high
interest rates. Market analysts expect a slight increase in the U.S. PMI from
46.3 to 46.6, and a rise in the Services PMI to 51.6 from 51.2.

The market anticipates that
the RBA will maintain the current interest rates at this week’s meeting,
similar to their decision at the last meeting. Despite the persistent high
inflation in Australia, there are indications that it may have reached its
peak, prompting the Bank to adopt a wait-and-see approach to assess the effects
of monetary policy decisions. According to Governor Lowe’s remarks after the
RBA’s last meeting, holding the rates unchanged did not necessarily mean that
hikes had come to an end.

For the March JOLTS Job
openings data the consensus is for a drop to 9.74M from 9.93M, but Citi
analysts actually expect a slight rise to 10.1M following an unexpected drop in
February. Even with that drop, job openings are currently at a higher number
than pre-pandemic levels.
The upcoming data for New Zealand includes the Q1 Employment Change, with a
consensus for it to remain unchanged at 0.2%, as well as the unemployment rate,
which is expected to rise slightly from 3.4% to 3.5%. The participation rate is
likely to remain at 71.7%. These data are crucial for the RBNZ, which needs to
see evidence of a labor market easing and a cooling down of inflation before
pausing the rate hiking cycle.
The market expects a 25bps rate hike at the upcoming FOMC meeting, followed by
a pause to assess the effectiveness of the current monetary policy. Chair
Powell will probably be questioned about the possible end of the hiking cycle,
but he’s likely to reiterate the Fed’s data-dependency approach and avoid a
straight answer. Questions about the ongoing stress in the financial sector may
also be raised during the meeting.
This week, the focus will be on the inflation data for the eurozone, as it
could provide insight into the ECB’s upcoming meeting on Thursday. Following a
rise in core inflation in March, ECB Chief Economist Philip Lane emphasized
that more tightening is likely, stating that „the current data are
indicating that we should raise rates again.“ The market consensus is for
a 25bps rate hike at the May meeting, followed by another 25bps hike in June.
It is anticipated that y/y headline inflation data for April will run hot.
Despite mixed recent data, the job market remains tight in the United States.
Analysts predict that payroll growth will slow from 236K to 180K, while average
hourly earnings m/m are expected to remain stable at 0.3%, and the unemployment
rate is anticipated to rise from 3.5% to 3.6%.
„The labor force participation rate also rose for a fourth straight
month,“ Wells Fargo analysts said. „But falling hiring plans and job
openings point to demand for workers continuing to trend lower.“

For the Canadian economy the
employment change is expected to drop from 34.7K to 22.6K and the unemployment
rate to rise from 5% to 5.1%.

This article was written
by Gina Constantin.

This article was written by ForexLive at www.forexlive.com.

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Newsquawk week ahead May 1st-5th: FOMC, NFP, ISMs, ECB, RBA, EZ CPI, NZ jobs 0 (0)

  • MON: South Korean Import/Export Growth (Apr), US
    S&P Global Manufacturing PMI Final (Apr), US ISM Manufacturing PMI (Apr),
    European Labour Day Holiday, UK Early May Bank Holiday
  • TUE: RBA Announcement, South Korean CPI (Apr),
    German Retail Sales (Mar), EZ Flash CPI (Apr), US Durable Goods R (Mar), New
    Zealand Jobs (Q1)
  • WED: FOMC Announcement, RBNZ FSR, CNB
    Announcement, BCB Announcement, Japan Constitution Day Holiday, EZ Unemployment
    (Mar), US ADP National Employment (Apr), US S&P Global Services and
    Composite PMI Final (Apr), US ISM Services PMI (Apr)
  • THU: ECB Announcement, Norges Announcement, Japan
    Greenery Day Holiday, Australian Trade Balance (Mar), Chinese Caixin
    Manufacturing PMI (Apr), German Trade Balance (Mar), EZ PPI (Mar),
  • FRI: RBA SoMP, Japan Children’s Day Holiday,
    Chinese Caixin Services PMI (Apr), EZ Retail Sales (Mar), US Labor Market
    Report (Apr), Canadian Labor Market Report (Apr)

NOTE: Previews are listed in day-order

US ISM Manufacturing PMI (Mon)/Services PMI (Wed):

The consensus looks for the manufacturing ISM to rise to 46.6 from 46.3. Analysts look for the services gauge to rise to 51.6 from 51.2. Using the S&P Global PMI data series as a proxy, traders might expect some upside potential, given that the surveys revealed stronger demand conditions supporting sharper growth in April, but also highlighted renewed inflation momentum.

„The latest survey adds to signs that business activity has regained growth momentum after contracting over the seven months to January,“ adding that „growth is also reassuringly broad-based, led by services thanks to a post-pandemic shift in spending away from goods, though goods producers are also reporting signs of demand picking up again.“ The data also showed that jobs growth had accelerated alongside the resurgence of demand. That said, S&P said that the upturn in demand has also been accompanied by a rekindling of price pressures; „average prices charged for goods and services rose in April at the sharpest rate since September of last year, the rate of inflation having now accelerated for three successive months,“ S&P writes, „this increase helps explain why core inflation has proven stubbornly elevated, and points to a possible upturn – or at least some stickiness – in consumer price inflation.“

RBA Announcement (Tue):

The RBA is to decide on rates next week with 26 out of 34 economists surveyed by Reuters forecasting the Cash Rate Target to remain unchanged at the current level of 3.60%, while money markets recently priced in an 85% likelihood of a pause and just a 15% chance for a 25bps increase. As a reminder, the RBA kept rates unchanged at the last meeting in April, which was the first time it paused after 10 consecutive rate increases, with the decision to keep rates steady to provide additional time to assess the impact of tightening to date and the economic outlook.

Despite the pause in rates, the central bank’s rhetoric was hawkish as it stated that the Board expects some further tightening of monetary policy may well be needed and it remains resolute in its determination to return inflation to target and will do what is necessary to achieve that. The minutes from the meeting also noted that the Board considered a rate hike before deciding to pause and that it is important to be clear policy may be tightened again to curb inflation in a timely manner with inflation still too high, while RBA Governor Lowe stated during a speech the following day that the decision to hold rates steady does not imply interest rate rises are over and although he was not 100% certain they will have to hike rates again, the balance of risks lean towards further rate rises.

In terms of the recent data releases, inflation figures for Q1 were somewhat mixed and slightly favored the likelihood of a pause as the headline CPI readings topped forecasts (QQ 1.4% vs. Exp. 1.3%, YY 7.0% vs. Exp. 6.9%), but all other components were softer than expected and supported the view that the economy had passed peak inflation. Nonetheless, a future rate hike cannot be ruled out given that inflation remains firmly above the RBA’s 2-3% target band.

EZ Flash CPI (Tue): Expectations are for headline Y/Y CPI to fall to 6.8% from 6.9% with the super-core metric set to hold steady at 5.7%. The prior release saw a notable decline in the headline rate to 6.9% from 8.5% amid lower energy inflation, however, greater focus was placed on the increase in core inflation to 7.5% from 7.4% as a result of rising services inflation

New Zealand Jobs (Tue): The Q1 Employment Change is expected at 0.2% (prev. 0.2% in Q4), with the Unemployment Rate seen ticking higher to 3.5% from 3.4, whilst the Participation Rate is expected to remain steady at 71.7%. The Labour Cost Index is expected to rise to 4.6% Y/Y (from 4.3%), while the M/M metric is expected to remain at 1.1%. With forecasts similar to the RBNZ’s for the March quarter, these figures are unlikely to significantly influence the May monetary policy decision.

However, Westpac suggests the RBNZ will require evidence in the coming months that the labour market is slowing down to be confident that interest rates have reached an appropriate level. The desk adds that businesses continue to hire, while wage growth typically lags behind the broader economic cycle. Annual wage growth is expected to accelerate further, despite consumer price inflation now past its peak.

FOMC Announcement (Wed): The consensus expectation is for the FOMC to lift rates by 25bps at its May meeting, and then the market expectation is for the central bank to stand pat on policy. Chair Powell will likely be quizzed on whether the central bank is on pause, and while some expect the Fed chief to confirm that the hiking cycle has now run its course, he has previously batted-off such lines of questioning, reiterating that the Fed remains data dependent in its policy approach.

And while inflation has come off pandemic peaks, it remains significantly above the Fed’s 2% target (it was 4.9% in Q1, according to the latest GDP report). For reference, the Fed has historically stayed at terminal for between 3-15 months, with the average being around 6.5 months; if the historical playbook is used, then traders might expect rate cuts by the end of the year. Indeed, this is what money markets are pricing. At pixel time, the market is pricing in about 30bps of rate cuts this year after the Fed lifts rates in May – which is at odds with what Fed officials were guiding ahead of their pre-meeting blackout window – as the banking crisis stokes concerns about credit tightness, and growth dynamics cool.

According to a Bloomberg survey, 43% expect that the statement will signal a likely pause at the next meeting, while 26% think that the FOMC will give no guidance on future rates, 22% think that the FOMC will repeat that it ‚anticipates that some additional policy firming may be appropriate‘, or even include other language signalling a tightening bias; the survey also finds that 59% do not think there will be any dissenters, while 41% think that there will be one or more.

Elsewhere, Powell will also be quizzed on the banking sector; most see the tightening of credit conditions the equivalent to around 25-50bps of rate hikes; Powell didn’t give an exact figure at the previous meeting, but may be asked to provide more details on how commercial and industrial loans are expected to be impacted.

US Quarterly Refunding (Wed): The Treasury’s quarterly refunding announcement on May 3rd is expected to see all coupon sizes left unchanged, again: expected to sell USD 40bln of 3yr notes, USD 35bln of 10yr notes, and USD 21bln of 30yr bonds. That comes as the Treasury looks to increase bills as a share of the marketable debt; the share is currently at the low end of the TBAC’s recommended 15-20% range. However, the share will not meaningfully increase until a resolution on the debt limit is reached, which desks don’t expect until later in the year, although we may get an updated view from the Treasury on when they expect the „X-date“ to occur.

Treasury Secretary Yellen recently estimated it to be in early June, although depending on tax receipts, that could extend to later in the summer. On coupon supply, some desks do expect the Treasury to increase auction sizes again from the end of this year once the debt limit is resolved and bill share has increased, so the TBAC minutes might give us some colour on that. Finally, a Treasury buyback facility remains the wildcard, where nothing concrete is expected from this refunding, but a facility does appear closer following the recent questionnaire sent out to primary dealers on buybacks. BofA, to whit, „these questions combined with TBAC communication at the February refunding continues to suggest that the rollout of a buyback program at both the 0 – 1Y & 1Y+ tenors is more likely than not.“

BCB Announcement (Wed): The Copom held the Selic at 13.75% at its previous meeting, and struck a hawkish tone, revising inflation forecasts higher and warning that „the de-anchoring of long-term inflation expectations raises the cost of the disinflation“, and that it „will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected.“ This week’s IPCA-15 inflation data for April showed inflation falling to a 30-month low amid declines in food prices; Pantheon Macroeconomics said „all told, the inflation picture continues to improve in Brazil, thanks to favourable base effects, the lagged effect of stiflingly high interest rates, and softening domestic demand,“ adding that „the effect of a relatively stable BRL and falling raw material prices are also helping to offset the hit from the resumption of key taxes.“

Pantheon sees inflation continuing to fall ahead, though could still tick up towards the end of the year as favourable base effects fade. „Key components, including services, and core measures, particularly EX3—which is closely linked to the output gap—remains relatively sticky. But we suspect price pressures will ease further over the next three-to-six months, on the back of weaker demand.“ The most recent BCB survey revealed that economists see the Selic at 12.50% by the end of this year (unchanged vs the previous survey), and it is seen at 10.00% by the end of 2024 (also unchanged vs the previous survey). This week, BCB chief Campos Neto told lawmakers that it will not cut rates until inflation risks are contained, and has previously suggested that rates were at an appropriate level for containing the demand-driven inflation. „The central bank seems determined not to change its stance and to focus instead on bringing inflation expectations down to target,“ SocGen writes, „as such, we do not expect the Copom to begin easing in May. And there is now a rising possibility that the Copom will extend its pause in June too.“

ECB Announcement (Thu): Consensus looks for a 25bps hike in the Deposit Rate to 3.25%, according to 57/69 analysts surveyed by Reuters, while the remaining 12 look for a 50bps increase. Market pricing concurs with the consensus with 25bps priced at around 70% vs. 30% for 50bps. The March meeting saw the ECB defy expectations for a 25bps hike (was priced at around 65% heading into the meeting) and opt for a 50bps adjustment on the basis that “inflation is projected to remain too high for too long”. Furthermore, the Bank downplayed financial stability concerns, stating that “the euro area banking sector is resilient, with strong capital and liquidity positions”.

Since March, inflation data has seen Y/Y HICP decline to 6.9% from 8.5%, while the super-core reading rose to 5.7% from 5.6%. The influential Schnabel of Germany has cautioned that when it comes to policy, “we need to see a sustained decline in core inflation that gives us confidence that our measures are starting to work” and therefore even if core inflation was to peak it wouldn’t necessarily bring about a pivot from the GC. It’s worth noting that April inflation figures will be released on Tuesday, whereby expectations are for Y/Y CPI to fall to 6.8% from 6.9%, with the super-core metrics set to hold steady at 5.7%.

In the banking sector, nothing has transpired since March to test its resilience and therefore is unlikely to act as an impediment to the upcoming decision. That said, there will be attention ahead of the announcement on Tuesday’s Bank Lending Survey given the importance placed on it by various members of the GC. Any signs of slower lending in the Eurozone could provide some ammunition to the doves given that the account of the March meeting showed that “some members would have preferred not to increase the key rates until the financial market tensions had subsided”. Danske Bank notes that “we take it as given that the BLS will point to tightening credit standards, as the ECB is already in a tightening cycle, which means that we see the focus of this BLS to be on what additional tightening the recent turmoil has added”.

As it stands, messaging from policymakers has suggested that the policy options will be between a 25bps and 50bps hike, with the Bank required to deliver further tightening to bring inflation back to target. Given the political nature of the GC, it is expected that 25bps will be the compromise between the hawks and doves who will also be jostling over how high the terminal rate will reach in the coming months, with markets currently priced for the Deposit Rate to reach 3.75% in July.

Norges Announcement (Thu):

Expected to hike by 25bp to 3.25%, given domestic data remains strong and while CPI-ATE is in-line with the Norges Bank’s forecast, the figure remains elevated with the trend erring higher and above market consensus. Tightening would be in-fitting with the guidance from March. Rates aside, participants will be focused intently on the repo path, particularly after the dovish-hike from the Riskbank. Currently, the path implies a rate reduction by end-2024 to 3.45% from the current 3.60% peak which is seen by end-2023; conversely, markets are pricing over 75bp worth of easing by end-2024. Given the recent up-tick in CPI-ATE, the Norges Bank may well err on the side of caution and leave the policy path unaltered in order to underscore their commitment to bringing inflation under control

US Labor Market Report (Fri):

The US economy is expected to add 181k nonfarm payrolls in April, cooling from the 236k added in February, which would also be beneath recent trend rates (for reference, the three-month average is currently 345k, 6-month 315k, and the 12-month 345k). The unemployment rate is expected to rise by 0.1ppts to 3.6% – the Fed projects the jobless rate will rise to 4.5% this year, and then tick-up to 4.6% next year and in 2025.

„Labor demand appears to have cooled further, but this is a slow and gradual tailing off rather than an abrupt collapse,“ Capital Economics said. „After a brief turnaround to start the year, weekly hours worked and temporary employment, which are forward-looking indicators of employment, started to fall back again in March.“ Analysts also point to series like the JOLTs data, and job posting websites like Indeed and LinkUp, which allude to fewer job postings in recent months. The signal from business surveys has been more mixed, with ISM data for March showing Employment sub-indices easing (note: April ISM data is out next week too), although the S&P Global PMI data was more constructive.

Weekly jobless claims data has been ticking up, boosted after the recent revisions to the data, although economists say the levels still remain historically low. There have also been clear signs of a cooling in wage growth recently, although Capital Economics is expecting average hourly earnings to increase by a slightly bigger 0.4% M/M in April, due to a survey sample period which includes more weekend dates and can often cause temporary distortions.

This article originally appeared on Newsquawk

This article was written by Newsquawk Analysis at www.forexlive.com.

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First Republic auction underway. Deal seen before markets reopen 0 (0)

The US FDIC is holding a auction of the assets of First Republic Bank this weekend, according to a Reuters report. There are roughly six bidders for the assets, including a bid from JPMorgan.

The report says bidders were asked for non-binding bids Friday and will be studying FRC’s books over the weekend.

A deal is expected before Asian markets open.

In all likelihood a wind down of the bank will allow markets to move on but there’s also the risk that it sparks fears elsewhere or triggers trouble at another bank.

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

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Time is up: FDIC prepares to place First Republic under receivership – report 0 (0)

It appears as though the clock ran out on First Republic Bank.

Reuters, citing sources, reports that the US Federal Deposit Insurance Corporation is preparing to place the struggling bank under receivership „imminently“.

It’s no surprise as reports on Friday suggested that time was running out and that no private sector-led rescue was coming. Various reports said there were banks who were prepared to buy and run FRC within the FDIC resolution mechanism.

Shares of the company fell 43% on Friday and have tumbled precipitously this week to $3.51 from $16 at the start of week. This week’s breakdown was precipitated by a report from the bank that showed $100B of $176B in consumer deposits fleeing, which was worse than analysts had expected.

Equity holders are highly likely to be wiped out as the FDIC takes over but depositors will be made whole.

For the broader market, this is unlikely to be a meaningful event. Other regional banks reported much smaller drawdowns in deposits and shares held relatively steady through the latest storm. If anything, I suspect the resolution will help to put the episode in the rearview mirror and put the focus back on economic data.

Update: The WSJ now reports that JPMorgan and PNC have bid to take over First Republic after the FDIC seizes the bank.

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

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Forexlive Americas FX news wrap: EUR/JPY hits a 14-year high in major break 0 (0)

Markets:

  • Gold up $1 to $1989
  • WTI crude oil up $1.95 to $76.71
  • US 10-year yields down 9 bps to 3.43%
  • S&P 500 up 0.9%
  • GBP leads, JPY lags

The big story of the day was the Bank of Japan leaving policy unchanged and the yen taking a beating. It tumbled right across the board but arguably the biggest move in a technical sense was in EUR/JPY as the pair broke above the 2014 high and the 150.00 level, both for the first time since 2008.

Other yen crosses also made big moves and that could signal a fresh round of divergence. The BOJ staying easy also helped to put a bid in bonds.

The PCE headlines were hawkish but my sense is that the market sniffed it out based on the details in the GDP report. It was also another reminder that the market has moved past inflation worries and is more concerned the Fed is going to snuff out growth. The PCE inflation numbers appear certain to fall below 4% in short order and that could come as soon as next month.

Banking worries continue to percolate but they’re isolated around First Republic with the regional bank ETF up 1.7% on the day.

Cable was strong starting in North American trade in a move that foreshadowed the positive sentiment in equities that later appeared. Perhaps that was a coincidence and due to month-end flows but it was a strong move for the pound, perhaps with the lift of GBP/JPY bids.

One of the biggest intraday turns was in USD/CAD as the pair mirrored a reversal in oil and sentiment. USD/CAD rose as high as 1.3667 before sinking to 1.3550 late.

Have a great weekend.

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

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US equities finish at the highs of the day as fear quickly turns to FOMO. April goes green 0 (0)

Here’s how the week played out.

It started with worries about First Republic Bank and that ultimately led to a death spiral of the company as it reported much larger deposit outflows than anticipated. Shares hit $16 on Monday and are finishing the week around $3.50 with an FDIC takeover looming.

So what changed even as sentiment worsened? Mainly, the pain at FRC didn’t spread to other regional banks and that’s a case I made early in the week. The problem was that dip buyers didn’t want to wade in until mega-cap tech earnings were released. Even after strong Microsoft earnings, the market was skittish.

When Meta later had great earnings as well and some others were solid, that was enough to turn the tide and quickly led to FOMC. That feeling extended today despite some modest warnings about data centers from Amazon.

Here are the closing changes in North American markets today:

  • S&P 500 +0.9% — up 39 points to 4192
  • DJIA +0.8%
  • Nasdaq Comp +0.7%
  • Russell 2000 +1.0%
  • Toronto TSX Comp +0.5%

On the week:

  • S&P 500 +0.9%
  • DJIA +0.9%
  • Nasdaq Comp +1.3%
  • Russell 2000 -1.3%
  • Toronto TSX Comp -0.3%

On the month:

  • S&P 500 +1.5%
  • DJIA +2.5%
  • Nasdaq Comp flat

Seasonally, April is the strongest month of the year and it’s another victory for that trade but it certainly wasn’t smooth sailing.

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

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There’s only one cure for the Fed’s lack of a roadmap: time – CIBC 0 (0)

The market has been reluctant to fully price in a hike from the Federal Reserve next week with odds hovering around 85%. Some of that may reflect uncertainty about First Republic Bank but it’s also a signal that the end of rate hikes is near. Even if the Fed does hike on May 3, the market isn’t expecting anything afterwards.

„The Fed needs to hike in May and go away,“ writes CIBC today. „By standing pat for a couple of quarters, the FOMC will gain considerable insight into the drag from developments at regional banks. With growth slowing, inflation is unlikely to run away to the upside, but we’ll need time to let it ease off enough. So our call is for May’s move to be the final hike for this cycle.“

The estimate that the impacts of the banking strain are roughly equivalent to 50 bps but that’s much more art than science because each banking episode is unique and it’s too early to tell.

„All of this is complicated by the fact that we were overdue for a retrenchment from the bloated liquidity seen during the pandemic. The 4% year-on-year decline in the money supply is without precedent since the Great Depression, but in level terms, the money supply still looks ample relative to its prior trend line.“

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

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