The dollar lost more ground yesterday following weaker than expected Q1 US GDP data, continuing a trend of weak US data this week. The dollar fell to around $1.0730 to the euro, and has now lost more than 1/2 cent this week against the single currency, and to $1.25 to sterling, down more than 1 cent from Monday’s trading. The euro has also conceded a little room to sterling and kicks off this morning at 85.8p from over 86p earlier this week. The yen weakened to a fresh multi decade low of Y156.5 to the dollar following a Bank of Japan meeting where policy was kept on hold and no currency market intervention was announced.
Yesterday’s Events
The weaker US GDP data also weighed on equities where the S&P 500 had seen gains early in the week, due to some solid quarterly corporates earning reports, but lost 0.5% yesterday.
Government bond yields continued to tick upwards, US 10-year yields were up another 5bps to nearly 4.7% (+10bps from Monday’s trading) while German 10-year yields were up 4bps to 2.63% and UK bonds 3bps to 4.36%.
US growth slowed to a two-year low of 1.6% (annualised) quarter-on-quarter in Q1. This is less than half the pace of the 3.4% expansion in Q4 and lower than the expected 2.5% increase. However, underlying demand is stronger than the headline figure suggests. Personal spending held up reasonably well, up 2.5%, while investment rose 3.2%, helped by robust increase in residential investment as business investment growth was modest.
ECB member Panetta was out with very dovish comments. He warned that the ECB needed to ease monetary policy soon. He said that ‘unnecessary delays’ in cutting rates increases the risk of undershooting the 2% inflation target in the future and correcting that would require a return to ultra-low rates. He also said that delays by the Fed in starting their easing cycle should be no obstacle to the ECB starting to cut.
In Japan, the Bank of Japan left policy unchanged and did not- for now – announce any currency market intervention. Governor Ueda played down the Yen impact on inflation but did leave open the possibility of market intervention in the future.
The Day Ahead
On the agenda today we have inflation expectations in the Euro Area and US personal income and spending and PCE inflation.
Today's Talking Points 26.04.24
Market Commentary
The dollar lost more ground yesterday following weaker than expected Q1 US GDP data, continuing a trend of weak US data this week. The dollar fell to around $1.0730 to the euro, and has now lost more than 1/2 cent this week against the single currency, and to $1.25 to sterling, down more than 1 cent from Monday’s trading. The euro has also conceded a little room to sterling and kicks off this morning at 85.8p from over 86p earlier this week. The yen weakened to a fresh multi decade low of Y156.5 to the dollar following a Bank of Japan meeting where policy was kept on hold and no currency market intervention was announced.
Yesterday’s Events
The weaker US GDP data also weighed on equities where the S&P 500 had seen gains early in the week, due to some solid quarterly corporates earning reports, but lost 0.5% yesterday.
Government bond yields continued to tick upwards, US 10-year yields were up another 5bps to nearly 4.7% (+10bps from Monday’s trading) while German 10-year yields were up 4bps to 2.63% and UK bonds 3bps to 4.36%.
US growth slowed to a two-year low of 1.6% (annualised) quarter-on-quarter in Q1. This is less than half the pace of the 3.4% expansion in Q4 and lower than the expected 2.5% increase. However, underlying demand is stronger than the headline figure suggests. Personal spending held up reasonably well, up 2.5%, while investment rose 3.2%, helped by robust increase in residential investment as business investment growth was modest.
ECB member Panetta was out with very dovish comments. He warned that the ECB needed to ease monetary policy soon. He said that ‘unnecessary delays’ in cutting rates increases the risk of undershooting the 2% inflation target in the future and correcting that would require a return to ultra-low rates. He also said that delays by the Fed in starting their easing cycle should be no obstacle to the ECB starting to cut.
In Japan, the Bank of Japan left policy unchanged and did not- for now – announce any currency market intervention. Governor Ueda played down the Yen impact on inflation but did leave open the possibility of market intervention in the future.
The Day Ahead
On the agenda today we have inflation expectations in the Euro Area and US personal income and spending and PCE inflation.
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