US flash services PMI from S&P Global 54.7 vs 58.0 expected
Fed’s Mester: I’d like to get to 2.50% by year-end
Canada IPPI for March +4.0% versus +2.6% last month (revised from 3.1%)
Kuroda lost in translation
Baker Hughes US oil rig count 549 vs 552 expected
Yellen:Worth considering steps to lower US tariffs on Chinese goods to lower inflation
BOE’s Bailey: There is a risk of second-round effects
BOEs Bailey: We will only do QT in stable markets. Will cease if conditions change
Macron’s poll numbers put him comfortably ahead before Sunday’s vote
Lagarde: Ukraine war may mark a watershed for globalization
Markets:
Gold down $19 to $1932
WTI crude down $2.54 to $101.23
US 10-year yields flat at 2.90%
S&P 500 down 122 points, or 2.8%, to 4271
Nasdaq hits a six-week low
USD leads, AUD lags
For the second day, the market started out in a decent mood and imploded in a move that looks a lot like deleveraging.
The hints of problems in the broader mood were clearest in FX as the Australian and kiwi dollar struggled starting in Asia. In Europe, worrisome comments from Bailey yesterday combined with poor UK retail sales finally led to a clean break of 1.3000 in cable. That extended all the way to 1.2830 in a bruising day with a close on the low.
The euro fell through 1.08 once again but didn’t break the recent lows. That will be something to watch in the week ahead with the April low clocking in at 1.0757, which is just 40 pips from spot.
USD/JPY was taken for a ride as it navigated higher yields, intense risk aversion and some mis-translated comments from Kuroda. Those comments initially boosted USD/JPY to 1.29 but they were taken back hours later and the pair retreated to 128.55. Still, it was an impressive feat for the pair to finish higher despite the ugly mood.
Another area to watch is USD/CNY, which rallied by more than 2% this week. That’s the largest one-week move since August 2015, a week that kicked off some heavy selling in equities as well.
The Dollar Index closed out the week at the highest since the very peak of the pandemic scare in March 2020. Ignoring those two weeks would take it back to 2017. Notably, nearly all trades closed at the extremes of the week, including AUD, NZD, GBP and CAD.
The good news is that it’s the weekend and the Fed blackout period starts on Saturday.