Archives of “May 31, 2019” day

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JPMorgan and Barclays now both see rate cuts later this year

  
  Analysis

Economists see cuts

It’s tough to argue with the bond market. There’s no doubt now that fixed income is anticipating rate cuts as Trump fights a trade war on two fronts. That’s sent USD/JPY to the lowest since late January today and yields 8 bps lower at the front end.
Barclays now sees the Fed cutting rates three times — a total of 75 basis points — before year end. That mirrors a separate note from JPMorgan today where they forecast two cuts if the trade war with Mexico escalates.
“Last night’s tariff announcement adds yet another trade-related headwind to the growth outlook. If the Administration follows through on the proposed actions, we believe the adverse growth implications would prompt Fed easing.Even if a deal is quickly reached with Mexico, which seems plausible, the damage to business confidence could be lasting, with consequences that might still require a Fed response,” economist Michael Feroli wrote.
The Fed funds market is now seeing a 41% chance of a cut in July and a 73% chance of two cuts before year end.
Economists see cuts

European shares end lower on the day. Not a good week.

  
Analysis, Global Indices

uropean indices end the week with declines for the day/week

The major European stock markets are ending the session lower. For the week, they are also in the red.
The provisional closes are showing:
  • German DAX, -1.5%
  • France’s CAC, -0.82%
  • UK’s FTSE, -0.8%
  • Spain’s Ibex, -1.6%
  • Italy’s FTSE MIB, -0.77%
For the trading week, the major indices are also lower:
  • German DAX, -2.3%
  • France’s CAC -2.15%
  • UK’s FTSE, -1%
  • Spain’s Ibex, -1.8%
  • Italy’s FTSE MIB, -2.8%
Looking at the German Dax from a technical perspective, the fall this week, has taken the index back toward its key 200 and 100 day moving averages. Looking at the chart below, the 100 day moving average is at 11631.20, while the 200 day moving averages is at 11620.29. The low today reached 11662.07 – comfortably above both.

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Dollar retreats on the session despite risk-off sentiment

  
Analysis, Forex

EUR/USD hits a session high of 1.1154 as the greenback softens

EUR/USD H1 31-05

What’s telling about the move here is that markets are calling into question the dollar’s allure as a haven currency amid the risk-off mood. In theory, the greenback should gain on soggy markets but there are reasons for traders to be more cautious this time around.
As mentioned earlier this week, the current situation may not warrant a straightforward dollar rise despite markets having been down this road before. There are considerable differences between the circumstances last year and this year.
What stands out to me is that Trump’s tariffs will eventually take a toll on US corporate earnings as profits hurt due to cost of goods rising and that in turn will eat at consumer demand and also at the US economy in the bigger picture.
US Q2 economic projections have already been slashed rather significantly over the past few weeks and with US equities also selling off (flows perhaps moving out of the US), markets are potentially at a crossroads now.
The question being: Is the global trade war involving the US bad for the dollar or is the US strong enough to brush aside these worries i.e. dollar being the best of a bad bunch?

China said to weigh ‘major retaliative measures’ against US on Huawei issue

  
  Analysis

According to Global Times editor, Hu Xijin

The tweet reads:

Based on what I know, China will take major retaliative measures against the US placing Huawei and other Chinese companies on Entity List. This move indicates Beijing will not wait passively and more countermeasures will follow.

There’s been plenty of talk so far about China responding in due kind against the US but those countermeasures have yet to really be firmed up or officially announced as of yet. But even so, such rhetoric won’t do markets any good and will continue to cause nervousness and jitters like what we’re seeing today.
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