Dealer Comments

Today's Talking Points 23.04.24

Market Commentary

There was little movement on a quiet news day in FX markets,  with the euro edging down a little to just under $1.0650 to the dollar and remaining above 86p to sterling while the GBPUSD cross is down a touch to around $1.2350.

 

Yesterday’s Events

Equities had a good start to the week, with the S&P 500 rising 0.9% for the day, breaking a run of 6 consecutive days of daily loses, and taking the index back over 5,000. This will be a key week for earnings in the US with a number of major corporates due to report in the coming days with analysts, for the most part, expecting positive news from the majority – or tech firms at least – to give equities a small boost.

Government yields also saw very little movement yesterday, with US 10-year yields largely unchanged at 4.6%. German 10-year yields ticked down just a few bps to just below 2.5% while the fall in the UK 10-year yields was similarly small, down 2bps to 4.2%.

Euro area consumer confidence rose to -14.7 in April from -14.9 in May. Economic growth remains sluggish in the major European economies and the consumer remains subdued though the trend in sentiment is upwards, although slowly, as easing inflation takes some of the pressure off households.

New ECB Governing Council member Patsalides said ECB rates are at the right level now to meet the inflation target. He said that ECB is not committed to future rate cuts or rate hikes but was data dependent. The Bank he said ‘has not determined its course’. It maintains ‘flexibility’ which depends on economic data ‘at the moment’. Other ECB members are more dovish on the rate path with Portuguese Governor Centeno saying the Bank could cut by up to 100bps this year.

 

The Day Ahead

On the economic data front today we have provisional April PMIs in the major economies and new home sales in the US. On the speaker front, Huw Pill and Jonathan Haskel from the BoE is due alongside Panetta and Nagel from the ECB.

Author: Ellen Moloney
Tel: 1800 30 30 03 / +353 (0)1 790 0000

22 Apr 2024

Today's Talking Points 22.04.24

Market Commentary

Heightened geo-political tensions will remain to the fore this week. The news that the US House of Representatives had finally passed a military aid bill for Ukraine will mean the continuation of that conflict and should slow recent Russian advances while there remains an increased risk of a wider Middle East War following last week’s Iran/Israel attacks.  In FX markets, the euro has ticked up to around $1.0660 to the dollar but sterling has lost some ground and dipped to below $1.24 against the dollar and the euro is back up to over 86p.

 

Yesterday’s Events

Government yields pushed higher over the course of last week, with US 10-year yields up to over 4.60% on Friday from around 4.50% the previous Friday. Similarly, UK 10-years start off this week close to 4.25% from 4.15% the previous week while German 10-years are at 2.5% this morning.

Crude oil prices remain elevated and sensitive to news from the Middle East, a barrel of Brent crude dipped back below $90 during last week but remains close to that level, well up on the $75/barrel prevailing at the turn of the year.

House prices in the UK rose by 1.1% month-on-month in April according to Rightmove, the fourth consecutive monthly gain. That left the annual increase at 1.7% this month and means that asking prices in the UK are now close to record highs. Rightmove said there are signs of more activity in the market with the numbers of sellers up 12% on the year while sales rose 13%. However, the survey did sound notes of caution as with BoE monetary policy at restrictive levels , it said ‘these are not the conditions to support substantial price growth’.

Bank of France Governor Villeroy said the ECB would not be turned from a June rate cut despite oil price volatility caused by conflict in the Middle East. He also commented that further cuts should be pursued at a ‘pragmatic pace’ and that the Bank would have the capacity to adapt if any external shock threatened the inflation path returning to normal. Others remain more cautious with Nagel out on Friday to say that it is ‘absolutely premature’ to talk about cuts beyond June and rates must remain ‘restrictive’, while Muller said that monetary policy should not be loosened too quickly and cuts after June could be ‘reasonable’.

 

The Day Ahead

It’s fairly quiet on the economic data front today with the CBI report due in the UK and consumer confidence in the Euro area.

Author: Ellen Moloney
Tel: 1800 30 30 03 / +353 (0)1 790 0000

19 Apr 2024

Market Commentary

News of an Israeli drone attack on Iran overnight saw oil prices pop higher, US yields fall and safe-haven currencies gain ground, though these moves have since been partially reversed after Iran said it had no immediate plans to respond. In FX markets, the yen and Swiss franc have given up most of their initial gains, while the euro and sterling are back up to around $1.0650 and $1.2440 respectively having briefly dipped to around $1.06 and $1.2390 (leaving EURGBP trading just north of £0.8550).

 

Yesterday’s Events

US government 10-year yields are around 5bps lower at 4.58%, having fallen to around 4.50% initially on news of the Israeli attack, while equivalent German and UK yields are marginally lower at the open this morning. In equity markets, Asian stocks took a hit overnight while European indices have opened lower today (the Euro Stoxx 50 is off around 0.8%).

Brent crude oil Prices jumped by around $4 to $91 per barrel but have since come back to about $88, only slightly above yesterday’s close, though obviously they will remain sensitive to any further developments in the Middle East.

In the UK, retail sales in March were weaker than expected according to data published earlier this morning, with volumes flat on the month having risen by 0.1% in February. Volumes in the first quarter were still up 1.9% on the final quarter of last year though, partly reflecting strength in spending in January, which will make a positive contribution to GDP growth in Q1.

Fed member Kashkari says the central bank must be “patient as long as it takes until we are convinced that inflation is on its way back down to 2%,” adding the interest rates could remain on hold through all of this year.

 

The Day Ahead

It is very quiet on the economic data front today with nothing of note due, while there are a few central bank members scheduled to speak.

Author: Ellen Moloney
Tel: 1800 30 30 03 / +353 (0)1 790 0000

18 Apr 2024

Today's Talking Points 18.04.24

Market Commentary

There was some mild respite for the euro in yesterday’s session, having been under pressure recently, with the single currency gaining ground against both the dollar and sterling. It is trading at around $1.0680 and at 85.7p respectively this morning, while the pound is also slightly firmer against the dollar at $1.2460.

 

Yesterday’s Events

There was also some respite for US bonds yesterday with 2- and 10-year yields falling by around 5bps and 10bps respectively, while German and UK yields were largely unchanged on the day. In equity markets, the S&P 500 in the US closed lower for a fourth straight session, shedding around half a percent, while European stocks ended broadly flat.

The Fed’s latest Beige Book report on current economic conditions, which is based on largely qualitative information from business and other contacts, is somewhat at odds with the recent hard data on the US economy. It notes that “overall economic activity expanded slightly, on balance, since late February” (with) weakness in discretionary (consumer) spending as consumers’ price sensitivity remained elevated” (while) “firms’ ability to pass cost increases on to consumers had weakened considerably in recent months, resulting in smaller profit margins.”

ECB’s Vasle says “the economic situation in the US is at the moment different from the Euro area, so it’s a logical consequence that the reaction of monetary policy might also be different” though he adds that “this divergence has limits.”

Fed member Mester says the central bank shouldn’t be in a hurry to cut interest rates. She is “still expecting inflation to come down but we need to be watching and gathering more information before we take an action” (on rates).

 

The Day Ahead

Economic data due today include construction output in the Euro area and weekly jobless claims and existing home sales in the US, while there are a number of central bank members scheduled to speak over the course of the day.

Author: Ellen Moloney
Tel: 1800 30 30 03 / +353 (0)1 790 0000

17 Apr 2024

Today's Talking Points 17.04.24

Market Commentary

The euro is hovering just above its 2024 lows against the dollar this morning trading at around $1.0625. Sterling is a little stronger after slightly firmer than forecast UK inflation data for March released earlier, trading at around $1.2460 against the dollar and 85.3p vis-a-vis the single currency.

 

Yesterday’s Events

US government 2-year yields breached 5% for the first time since mid-November following comments from Fed Chair Powell before easing back albeit still ending higher on the day. 10-year yields also closed higher, by around 7bps at 4.67%, as did equivalent German and UK yields (+5bps). In equity markets, European stocks shed almost 1.5% while US indices ended flat to marginally lower.

Fed Chair Powell says “recent data have clearly not given us greater confidence (that inflation is heading sustainably towards the 2% target) and instead indicate that is likely to take longer than expected to achieve that confidence,” adding that “it is appropriate to allow restrictive monetary policy further time to work” (the recent rise in bond yields is helping in this regard) while also noting that if inflation pressures persist, the Fed can keep interest rates steady for “as long as needed.”

ECB President Lagarde, in contrast, has said “if we don’t have a major shock in developments, we are heading towards a moment where we have to moderate the restrictive monetary policy that we have,” adding this is likely to happen “in reasonably short order” (i.e. almost certainly in June).

UK inflation data for March released earlier this morning were a touch firmer than expected, with the headline rate dipping to 3.2% from 3.4% and the core rate nudging down to 4.2% from 4.5%. Within core, goods inflation slowed further to 1.5% (from 1.9%) while services inflation was marginally lower but still elevated at 6% (from 6.1%). Headline inflation should fall a good bit in April (to around 2% or so) as lower household energy bills kick in.

 

The Day Ahead

It is reasonably quiet on the data front today. A final reading for March CPI inflation is due in the Euro area – the flash reading showed headline and core inflation at 2.4% and 2.9% respectively – while the Fed releases its latest Beige Book. There are a number of Fed, ECB and BoE members scheduled to speak today also.

Author: Ellen Moloney
Tel: 1800 30 30 03 / +353 (0)1 790 0000