Archives of “March 2019” month

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Fed’s Powell: Patience means FOMC is in no hurry to change rates

  
  Analysis

Powell on 60 Minutes

Powell on 60 Minutes
  • Policy rate now “roughly neutral”
  • Powell says he doesn’t believe Trump has the power to fire him
  • Says plans to serve his 4 year term
  • China, Brexit and Europe are risks to US economy
  • Still feels there will be materially positive growth in EU
  • Main risks to US are from abroad
  • We think the US outlook is a positive one
  • Repeats that economy is in a good place
  • Says watching retail sales after a weak December but that there is some evidence of a rebound in January
  • Notes Chinese steps to support growth
  • Financial conditions ‘generally healthy’
  • Stock market valuations mostly at ‘normal’ long-term levels
  • Large number of auto loan defaults is a product of the fact that the number of auto loans is much higher
Looking at rates, there isn’t much to change the outlook here for an extended pause. There is a definite and growing belief at the Fed that the US is a lone strong economy but the inference is that US growth alone wont’ be enough to spark rate hikes.

Crucial Update :Dollar Index ,Euro ,Yen ,Sterling ,INR ,CAD ,AUD ,PESO ,SPX 500 ,Nasdaq Composite ,FAANG Stocks -Anirudh Sethi

  
Analysis, Crude
The dollar rose against nearly all the currencies last week.  Among the majors, the chief exception was the Japanese yen, which seemed to benefit from the equity weakness and the drop in yields, perhaps not really so much of the widely touted safe haven attribute, but the unwinding of funding positions.  The main exception among emerging market currencies was the Indian rupee, which moved into the upper end of its three-month trading range as tensions with Pakistan appeared to ease, and foreign interest in Indian equities continued.
The disappointing US jobs growth saw the greenback’s gains pared ahead of the weekend.  Does the loss of momentum signal a correction is at hand? Will the anticipation of a dovish hold by the Federal Reserve on March 20 dissuade short-term participants from aggressively chasing the dollar higher from here?  Here is how we see the near-term technical condition.
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Treasuries surge as global stocks eye biggest weekly drop since December

  
  Analysis
With Friday’s closing bell just around the corner, US stocks look set to rack up a series of unfortunate milestones around winning and losing streaks.• A lower close for the S&P 500 today means the benchmark has fallen every day this week for a cumulative drop of about 2.4 per cent. That would rank as its worst weekly performance since December 21, just before the market bottomed.• The index is likely to close lower for the eighth time in nine sessions, but the five day losing streak it is likely to chalk up will rank as the longest since mid-November.• Subsequently, global stocks are set for their biggest weekly drop since December 21, too. The FTSE All World index has retreated 1.2 per cent over the past five sessions.• Benchmark US Treasuries are set for their biggest weekly rally since early December, as the yield on the 10-year has moved lower every day this week for a cumulative drop of 13.54 basis points to 2.6177 per cent. The previous time yields had fallen for five consecutive sessions was late November.• Data showing the weakest pace of US jobs growth since 2017 knocked the dollar on Friday. The DXY index, which tracks the buck against a basket of global currencies, looked set to end a seven-session winning streak that had been its longest in a month.• Speaking of losing streaks, step up to the plate the Dow Jones Transportation Average. The price-weighted gauge is down 0.7 per cent on Friday afternoon and looks set for a record 11th consecutive decline.The Dow Transports is often regarded by Wall Street as a predictor of growth given its composition of railroad operators, shipping companies and airlines that ship physical goods around the world. On Thursday, it fell for a record-equalling 10th straight session.• Indices including the S&P 500, Nasdaq Composite and FTSE All World all closed below their 200-day moving averages, seen by traders as long-term support levels.• While the three main measures of US stocks all remain less than 10 per cent away from their record highs, the small-cap focused Russell 2000 has fallen back into correction territory. It is down 12.7 per cent from its August 31 peak.

Argentina hikes rates sharply in bid to halt peso slide

  
  Analysis
Argentina’s central bank hiked its benchmark interest rate by the most in six months on Friday in a move aimed at propping up the peso, a day after the currency fell to a record low.The central bank sold short-term Leliq notes in two auctions at an average yield of 57.89 per cent, taking the benchmark interest rate up 600 basis points from 51.86 per cent on Thursday.The move, which takes interest rates back to their highest level since mid-January — helped stem demand for dollars, allowing the peso to recover to around 41.2 per dollar after sliding to a record low of 43.4 per dollar on Thursday. The peso has come under pressure in recent weeks as concerns grow that a sluggish economic recovery and fast inflation could sully President Mauricio Macri’s chances for re-election this year.The central bank has been struggling to sustain the exchange rate over the past week as concerns about the economy and a looming presidential election spur people to switch to dollars. A slower-than-expected recovery from recession and inflation that is running at annualised pace of nearly 50 per cent are also denting Macri’s chance of winning a second four-year term this October.Economists warn that the central bank’s decision to hike rates, while still down from peak of more than 70 per cent in October, are hurting the economy, with companies struggling to borrow and consumers putting off large purchases. According to a monthly survey of economists by the central bank, the economy is on track to contract 1.3 per cent and inflation slow to 32 per cent this year, with the peso weakening to 48 per dollar.

The JPY is the strongest currency this week, while the GBP was the weakest

  
Analysis, Forex

The USD was mostly higher

As the week comes to a close, which currencies were the big movers?
Taking a look at the % changes of the major currencies, the JPY was the strongest helped by “safety flows”.  The GBP was the weakest as traders got antsy about the lack of Brexit progress.
The USD was mostly higher rising against all the currencies with the exception of the NZD (down -0.10%) and the JPY (the greenback fell -0.71%) .
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