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EUR

05 Jun 2023

Weekly Market Update June 5

Exhibit 1 Recession fears are subsiding. Bloomberg US Economic Surprise Index Exhibit 2 Rate cut expectations are moving into 2024. Treasury Yields, % Exhibit 3 A long-expected growth rotation is firmly underway. Purchasing Manager Indices Exhibit 4 Saudi Arabia is working to bring oil markets into “balance” around $80. Production volumes, millions barrels per day Exhibit 5 Oil shorts aren’t “ouching” yet. Global benchmark prices, USD per barrel Exhibit 6 Margins of safety are widening. OPEC spare capacity, million barrels a day Exhibit 7 But observers expect further tightness. Consensus forecasts vs. implied forward prices, USD per barrel Exhibit 8...

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05 Jun 2023

Firming Rate Expectations Push Dollar Higher

With investors increasingly convinced the Federal Reserve will follow through on its “higher for longer” mantra – at least through the latter half of the year – the dollar is kicking another week with solid gains. Firming expectations for a July hike – coupled with a removal of bets on late-year cuts – are tilting rate differentials in the greenback’s favour, with the two-year Treasury yield holding near 4.54 percent, up from 4.06percent at the end of April. The pound, euro, and yen are all on the defensive, failing to break higher as relative growth expectations erode.  Friday’s non-farm payrolls report provided...

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05 Jun 2023

A matter of when, not if the RBA moves again

• US labour market. Another punchy US payrolls report. US yields rose, as did the USD. Broader risk sentiment remains positive.• Limited offshore data. Global event calendar is limited this week. Over the weekend Saudi Arabia announced a cut to its oil production.• RBA in focus. Will the RBA deliver another hike this week? Markets factoring in a ~40% chance. Given pricing, there could be an asymmetric AUD reaction. Risk sentiment remained positive at the end of last week. Equities added to recent gains with the US S&P500 rising by another ~1.5%. The S&P500 is now at its highest level...

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01 Jun 2023

False dawn?

• Optimistic markets. Sentiment improves, as a ‘skip’ by the Fed at the June meeting is factored in. Equities higher, bond yields & USD a bit lower.• US labour data. AUD has been boosted by the improved risk appetite. US labour market report released tonight. This could see the USD bounce back.• Wage decision. Ahead of the US data, the minimum/award wage decision is handed down this morning. This could influence RBA expectations & the AUD. The new month has started on positive footing with risk sentiment improving. But, from our perspective, the underlying data pulse and rationale given for...

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01 Jun 2023

Currency Markets Consolidate Ahead of Critical Non-Farm Payrolls Report

An easing in tail risks is helping lift global markets this morning after the US House of Representatives passed a bill to raise the debt ceiling. The measure passed by a 314-117 margin late last night, with Democrats joining with centrist Republicans to push the bill forward for approval in the Senate. Although disappointing earnings estimates are weighing on several of the biggest tech names, equity futures are broadly higher, Treasuries are reversing yesterday’s rally, and the dollar is edging upward against most of its major counterparts. The number of US employment vacancies jumped unexpectedly last month, further firming odds...

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