Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Markets Today: All bun, no burger
Michael O’Neill
FX Trader, Loonieviews.net
Summary: There was no shortage of event risk for traders to sink their teeth into yesterday and overnight. But when they finally bit into the issues, they found that their bun had no burger and even lacked condiments.
The Federal Open Market Committee minutes were expected to be tame. They were. Traders do not have any more clarity about the Fed’s intentions today than they did yesterday, or after the March 20 meeting.
The minutes said that “A majority of participants expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving the target range unchanged for the remainder of the year.” However, “Some participants indicated that if the economy evolved as they currently expected, with economic growth above its longer-run trend rate, they would likely judge it appropriate to raise the target range for the federal funds rate modestly later this year.” In a nutshell, US rates are not going higher in 2019, unless they do.
The US dollar continues to be trapped within well-defined ranges but managed to grind higher since New York opened, thanks to surprisingly strong US economic data. If the Fed is truly data dependent, today’s reports will encourage a hawkish bias. US Producer Prices rose 0.6% in March, well above the 0.3% forecast and February’s 0.1% result. Some analysts suggest that the reversal in commodity prices from their late 2018 declines could lead to higher than expected inflation. Weekly Jobless claims were 196,000, a level last seen 49 years ago. New Zealand and Canadian dollars led the major currencies lower since New York opened today.
Wall Street opened with all the enthusiasm of a root canal appointment. Prices are hovering around flat despite US Treasury Secretary Steven Mnuchin chirping that “we’ve pretty much agreed on an enforcement mechanism,” suggesting a China/US trade deal is becoming closer to reality. Recent warnings of slower growth from the ECB, Fed and IMF may be weighing on prices.
The minutes said that “A majority of participants expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving the target range unchanged for the remainder of the year.” However, “Some participants indicated that if the economy evolved as they currently expected, with economic growth above its longer-run trend rate, they would likely judge it appropriate to raise the target range for the federal funds rate modestly later this year.” In a nutshell, US rates are not going higher in 2019, unless they do.
The US dollar continues to be trapped within well-defined ranges but managed to grind higher since New York opened, thanks to surprisingly strong US economic data. If the Fed is truly data dependent, today’s reports will encourage a hawkish bias. US Producer Prices rose 0.6% in March, well above the 0.3% forecast and February’s 0.1% result. Some analysts suggest that the reversal in commodity prices from their late 2018 declines could lead to higher than expected inflation. Weekly Jobless claims were 196,000, a level last seen 49 years ago. New Zealand and Canadian dollars led the major currencies lower since New York opened today.
Wall Street opened with all the enthusiasm of a root canal appointment. Prices are hovering around flat despite US Treasury Secretary Steven Mnuchin chirping that “we’ve pretty much agreed on an enforcement mechanism,” suggesting a China/US trade deal is becoming closer to reality. Recent warnings of slower growth from the ECB, Fed and IMF may be weighing on prices.
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Chief Investment Strategist
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
Quarterly Outlook
Equities: Are we blowing bubbles again
Peter Garnry
Chief Investment Strategist
Explore key trends and opportunities in European equities and electrification theme as market dynami... -
Quarterly Outlook
Macro: Sandcastle economics
Peter Garnry
Chief Investment Strategist
Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p... -
Quarterly Outlook
Bonds: What to do until inflation stabilises
Althea Spinozzi
Head of Fixed Income Strategy
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ... -
Quarterly Outlook
Commodities: Energy and grains in focus as metals pause
Ole Hansen
Head of Commodity Strategy
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer