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
15 Apr 2024
Today's Talking Points 15.04.24
Market Commentary
There has been a muted market reaction to Iran’s attack on Israel over the weekend – perhaps due to attempts by the US and G7 to de-escalate the situation and indications from Israel that there won’t be an immediate retaliation – with little change in oil prices and no flight to bond markets or to safe haven currencies, though markets are likely to be nervous about future developments in the region.
In currency markets, the euro and sterling are edging higher against the dollar this morning, after both shed about 2 cents last week largely in response to stronger than expected US inflation data, trading at around $1.0650 and $1.2470 respectively. This leaves EURGBP little changed at 85.4p.
Yesterday’s Events
German bonds led a decline in sovereign yields on Friday – after they had backed up over the course of last week – as the market priced in a bit more by way of expected ECB rate cuts this year, with 2- and 10-yields both down around 10bps on the day. Bonds also benefited from a sell-off in equity markets, which were under pressure on the back of mixed company earnings results in the US and amid reports that Iran would launch an attack on Israel, with the S&P 500 shedding almost 1.5%.
Oil prices are actually a little lower this morning with Brent crude dipping back below $90 per barrel. They have been trending higher in 2024 though – they are up around 17% since the end of last year – partly reflecting increased geo-political tensions and will remain sensitive to developments in the Middle East particularly.
ECB member Villeroy says “bar a surprise, we should decide on the first (interest rate) cut at our next meeting on June 6,” adding that “our early June cut will have to be followed by other cuts by year-end.” He also says a return to the very low or even negative interest rates that prevailed between 2015 and mid-2022 is unlikely.
The Day Ahead
There’s a heavy enough schedule of economic data due this week, with US retail sales and industrial production in the US today and tomorrow respectively and labour market, CPI inflation and retail sales reports in the UK on Tuesday, Wednesday, and Friday respectively.
Author: Ellen Moloney
Tel: 1800 30 30 03 / +353 (0)1 790 0000
12 Apr 2024
Market Commentary
The euro is under pressure after the ECB left interest rates unchanged yesterday but indicated it is likely to cut them at its next meeting in June. The single currency has weakened to a new 2024 to date low of $1.0680 against the dollar and has slipped to around 85.3p against sterling. The latter has also lost further ground to the dollar to trade close to $1.25 this morning.
Yesterday’s Events
In government bond markets, US 10-yields rose further yesterday, reaching almost 4.6%, after increasing sharply on Wednesday following firmer inflation readings, while equivalent German and UK yields also closed higher on the day (there is some relief this morning though with yields generally edging down a little).
The ECB left interest unchanged at its latest meeting, noting that inflation has continued to fall and wage growth is gradually moderating. It added that if its updated assessment of the inflation outlook – which it will next make in June – were to “further increase its confidence that inflation is converging to the target”, it would be “appropriate to reduce the current level of monetary policy restriction” i.e. lower interest rates.
ECB member Stournaras says “now is the time” for the ECB to diverge from the Fed, noting that “the situations in the Euro area and the US are completely different (with) demand much stronger” in the US.
Data released earlier this morning show GDP in UK increased by 0.1% in February, while January’s outturn was stronger than initially estimated at 0.3%. Over the three months to February GDP was up 0.2% on the three months to November 2023, leaving the economy on track to post positive growth in the first quarter of this year having been in mild recession over the second half of last year.
The Day Ahead
Economic data is thin enough on the ground today with the University of Michigan consumer confidence/inflation expectations survey for April scheduled in the US.
Dealer Comments
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.
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.
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.
15 Apr 2024
Today's Talking Points 15.04.24
Market Commentary
There has been a muted market reaction to Iran’s attack on Israel over the weekend – perhaps due to attempts by the US and G7 to de-escalate the situation and indications from Israel that there won’t be an immediate retaliation – with little change in oil prices and no flight to bond markets or to safe haven currencies, though markets are likely to be nervous about future developments in the region.
In currency markets, the euro and sterling are edging higher against the dollar this morning, after both shed about 2 cents last week largely in response to stronger than expected US inflation data, trading at around $1.0650 and $1.2470 respectively. This leaves EURGBP little changed at 85.4p.
Yesterday’s Events
German bonds led a decline in sovereign yields on Friday – after they had backed up over the course of last week – as the market priced in a bit more by way of expected ECB rate cuts this year, with 2- and 10-yields both down around 10bps on the day. Bonds also benefited from a sell-off in equity markets, which were under pressure on the back of mixed company earnings results in the US and amid reports that Iran would launch an attack on Israel, with the S&P 500 shedding almost 1.5%.
Oil prices are actually a little lower this morning with Brent crude dipping back below $90 per barrel. They have been trending higher in 2024 though – they are up around 17% since the end of last year – partly reflecting increased geo-political tensions and will remain sensitive to developments in the Middle East particularly.
ECB member Villeroy says “bar a surprise, we should decide on the first (interest rate) cut at our next meeting on June 6,” adding that “our early June cut will have to be followed by other cuts by year-end.” He also says a return to the very low or even negative interest rates that prevailed between 2015 and mid-2022 is unlikely.
The Day Ahead
There’s a heavy enough schedule of economic data due this week, with US retail sales and industrial production in the US today and tomorrow respectively and labour market, CPI inflation and retail sales reports in the UK on Tuesday, Wednesday, and Friday respectively.
12 Apr 2024
Market Commentary
The euro is under pressure after the ECB left interest rates unchanged yesterday but indicated it is likely to cut them at its next meeting in June. The single currency has weakened to a new 2024 to date low of $1.0680 against the dollar and has slipped to around 85.3p against sterling. The latter has also lost further ground to the dollar to trade close to $1.25 this morning.
Yesterday’s Events
In government bond markets, US 10-yields rose further yesterday, reaching almost 4.6%, after increasing sharply on Wednesday following firmer inflation readings, while equivalent German and UK yields also closed higher on the day (there is some relief this morning though with yields generally edging down a little).
The ECB left interest unchanged at its latest meeting, noting that inflation has continued to fall and wage growth is gradually moderating. It added that if its updated assessment of the inflation outlook – which it will next make in June – were to “further increase its confidence that inflation is converging to the target”, it would be “appropriate to reduce the current level of monetary policy restriction” i.e. lower interest rates.
ECB member Stournaras says “now is the time” for the ECB to diverge from the Fed, noting that “the situations in the Euro area and the US are completely different (with) demand much stronger” in the US.
Data released earlier this morning show GDP in UK increased by 0.1% in February, while January’s outturn was stronger than initially estimated at 0.3%. Over the three months to February GDP was up 0.2% on the three months to November 2023, leaving the economy on track to post positive growth in the first quarter of this year having been in mild recession over the second half of last year.
The Day Ahead
Economic data is thin enough on the ground today with the University of Michigan consumer confidence/inflation expectations survey for April scheduled in the US.