Thursday, March 21, 2024

Capital Markets: "Market Hears a Dovish Fed and Sells the Greenback"

From Marc to Market:

Overview:  The Federal Reserve triggered a dollar sell-off yesterday and follow-through selling was seen in Asia before profit-taking emerged. That created a new dollar selling opportunity in early European turnover. The FOMC revised up this year's growth forecast, shaved the unemployment projection, and while maintaining the PCE deflator forecast, and the median dot remained for three cuts this year. The soft-landing scenario was underscored and excited risk appetites. The G10 currencies are mixed ahead of the North American open. The Swiss franc is the weakest after the Swiss National Bank became the first G10 central bank to cut rates. A strong employment report lifted the Australian dollar, which is the best G10 performer today. Emerging market currencies are mixed with central European currencies the weakest. The South Korean won is extending is recover on developments in the chip sector and its nearly 1.2% gain today is the best in three months.

Outside of China, the large equity markets in Asia Pacific rallied with the Nikkei, South Korea, and Taiwan advancing by more than 2%. Europe's Stoxx 600 is up a little more than 0.5%, while US index futures may gap higher. European benchmark 10-year yield are 4-6 bp lower, with the periphery outperforming the core. The 10-year US Treasury yield is off four basis points to almost 4.22%, a six-day low. The two-year yield is off nearly four basis points to 4.56%. It finished last week near 4.73%. Gold reached a new record high today, almost $2221. It was flirting with $2150 at the end of last week and earlier this week. May WTI is a little softer, consolidating the pullback from the five-month high set earlier this week slightly above $83....