Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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US data drought coming to an end
Michael O’Neill
FX Trader, Loonieviews.net
Summary: A relative lack of top-tier US data since last week's FOMC outing may be bolstering the status quo, but this week holds a slew of new stateside releases that have the potential to rock the boat.
There has been a shortage of top-tier, actionable US economic data since last week’s Federal Open Market Committee meeting. That changes this week, but it may not be the catalyst to jump-start FX volatility. February Housing Starts (actual -8.7%) and Building Permits (-8.7%) were not very impressive, and they were not expected to be due to nasty weather during the month. FX markets did not react to the news.
On Wednesday, US Trade Balance and Current Account data are due. The January trade deficit is expected to narrow to $57.0 billion from a nine-year peak of $59.8 billion in December. China’s contribution to the deficit could be a flash-point for FX, especially after China thumbed its nose at the US and bought 300 jets worth around $35 billion from Airbus.
Thursday, Q4 GDP (forecast 2.4%) is vulnerable to a below-estimates result on the back of the weak Retail Sales report and from the impact of the government shutdown, which may trigger renewed US dollar selling pressure. The only consolidation is that Q4 is history, and traders know it was a weak quarter.
Friday, Personal Spending and Income may have little lasting FX impact because the data may have been impacted by poor weather, as well.
Wall Street appears to have gotten over its yield curve inversion scare. The three major indices are up close to 1.0% in early trading, with a 1.45% jump in Apple shares (AAPL: Nasdaq) helping to improve the mood. Nevertheless, the DJIA still needs to recover another 266 points just to get back to Friday’s peak level.
The US dollar has traded with a mixed tone since New York opened. It has squeezed out gains against EUR, GBP, and JPY while drifting lower against CHF and the Antipodean currencies. The US dollar Index (USDX) underscores the dollar’s malaise as it has been rangebound since March 15.
On Wednesday, US Trade Balance and Current Account data are due. The January trade deficit is expected to narrow to $57.0 billion from a nine-year peak of $59.8 billion in December. China’s contribution to the deficit could be a flash-point for FX, especially after China thumbed its nose at the US and bought 300 jets worth around $35 billion from Airbus.
Thursday, Q4 GDP (forecast 2.4%) is vulnerable to a below-estimates result on the back of the weak Retail Sales report and from the impact of the government shutdown, which may trigger renewed US dollar selling pressure. The only consolidation is that Q4 is history, and traders know it was a weak quarter.
Friday, Personal Spending and Income may have little lasting FX impact because the data may have been impacted by poor weather, as well.
Wall Street appears to have gotten over its yield curve inversion scare. The three major indices are up close to 1.0% in early trading, with a 1.45% jump in Apple shares (AAPL: Nasdaq) helping to improve the mood. Nevertheless, the DJIA still needs to recover another 266 points just to get back to Friday’s peak level.
The US dollar has traded with a mixed tone since New York opened. It has squeezed out gains against EUR, GBP, and JPY while drifting lower against CHF and the Antipodean currencies. The US dollar Index (USDX) underscores the dollar’s malaise as it has been rangebound since March 15.
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