ElliottwaveSpecialist

ElliottwaveSpecialist

Weekend news has helped ease market-perceived geopolitical risk, and sentiment is generally supported across asset classes as the week starts. All interested parties appear to have chosen the path of downplaying the size and consequences of Friday’s Israeli strikes in Iran. Bent trading below $90/bbl signals that fears of a broader conflict in the region have...

ElliottwaveSpecialist

Sterling markets moved on Friday after the Bank of England's deputy governor, Dave Ramsden, sounded less concerned about price pressures and suggested that there were indications of UK inflation converging to that of the eurozone. Crucially, he added that the Bank will be “responsive” as evidence on inflation accumulates. Markets revamped some of their BoE rate...

ElliottwaveSpecialist

The Bank of Japan announces monetary policy on Friday and is widely expected to keep rates unchanged after March’s 10bp hike. The market’s focus should therefore be on the BoJ’s quarterly forecast report. Our economics team expects the inflation forecast to be revised upwards, considering the increased inflation in the first quarter, wage growth that exceeded...

ElliottwaveSpecialist

Abating concerns on Middle East tensions are positive for the pro-cyclical euro, although that also lowers the chances that higher oil prices will force a delay of the European Central Bank's cutting cycle. Market pricing for total 2024 easing is firming up at 75bp, which is also our call. Substantial data or market events may be needed to force a major repricing...

ElliottwaveSpecialist

UK March retail sales have come in slightly softer than expected this morning. That has clearly been overshadowed by news from Iran, but retail sales should not change the picture anyway for the Bank of England. Anyway, data this week has pointed to a lower probability that the BoE will start cutting rates before August, which is the month when our economist...

ElliottwaveSpecialist

It was reported overnight that Israel launched a retaliatory strike on the Iranian city of Isfahan. For now, it appears that Iranian media are downplaying the size of the attack, and reassured that nuclear facilities have not been affected. The news has had ramifications for different asset classes already, although the initial impact has partly been unwound in...

ElliottwaveSpecialist

Overnight developments have been driving the yen higher, although domestic developments may have contributed to JPY lagging the Swiss franc in this risk-off environment. Japan’s national inflation figures came in below expectations this morning, with headline CPI slowing from 2.8% to 2.7%, and core CPI from 2.8% to 2.6%. Core inflation excluding fresh food and...

ElliottwaveSpecialist

The euro isn’t as exposed as higher-beta currencies to a potential escalation in the Middle East, although extending the dollar considerations above, substantially higher energy prices could lead to a more structural bearish stance on EUR/USD. While we have been highlighting how a much stronger terms of trade and economic-fundamental position of the euro compared...

ElliottwaveSpecialist

USDJPY has been the story of the day. No imminent tightening hints from BoJ 'hawk' Tamura left USDJPY drifting higher, the pair nudged to highest levels since 1990. The move drove a response from Finance Minister Suzuki who said they will take "bold action" if needed, language we haven't seensince from him 2022. This is the second escalation this week after Kanda...

ElliottwaveSpecialist

Spain releases its March CPI estimates today, and while generally not being a major driver for markets, material deviation from consensus has generated market volatility in the past. Headline inflation is expected to rise back above 3.0%, but core should tick lower from 3.5% to 3.4%. Next up on the inflation release schedule in the eurozone are France and Italy on...

ElliottwaveSpecialist

FX markets have been struggling to find clear direction since the start of the week, with US data still giving contrasting signals. Yesterday, consumer confidence took a hit, as both the March and a revised February print ticked below 105.0. However, durable goods orders were strong and beat expectations. Our economists have looked closely at the non-defence...

ElliottwaveSpecialist

The USD is holding onto the gains made in the second half of last week, but with a rather quiet calendar ahead. In a holiday-distorted week, the only real nuggets of interest are likely to be the Fed’s preferred measure of inflation, the PCE deflator, and comments from Fed Chair Powell. Both come on Friday when the US equity market will be closed for the Good...

ElliottwaveSpecialist

Japan’s Vice Minister of Finance for International Affairs, Masato Kanda, gave the clearest intention yet that policymakers in Japan intend to intervene to support the JPY, if the currency continues to weaken. Kanda is the policymaker that makes the decision on whether to intervene and so his words tend to carry more weight with FX traders. Specifically, Kanda...

ElliottwaveSpecialist

Sterling is consolidating at slightly lower levels after the Bank of England's dovish bout of communications late last week. Thursday's dovish statement and minutes were backed up by an interview from Governor Andrew Bailey in the Financial Times on Friday. Here, he implied that multiple rate cuts would be coming through this year. That dovish turn from the BoE...

ElliottwaveSpecialist

Despite EUR/USD being back at 1.08, the European Central Bank's trade-weighted euro has been doing reasonably well over the last month and is up around 1.5%. Looking at positioning amongst the speculative community, positioning is still net long euro – although asset managers did chop around 10% of their euro net longs in the latest reporting week. Net euro longs...

ElliottwaveSpecialist

The Bank of England opted for a more dovish than expected communication yesterday. Despite keeping its guidance unchanged (rates to be restrictive for an extended period of time), the two most hawkish members changed their vote from a hike to a hold, and there was a mention in the minutes that rates can still be restrictive even with rate cuts. All this isn’t...

ElliottwaveSpecialist

The Swiss franc was dealt a blow yesterday as the Swiss National Bank unexpectedly cut rates by 25bp. Markets were pricing in around one in three probabilities of a cut yesterday, and the decision led to a broader repricing in the CHF curve. A back-to-back 25bp cut in June is almost fully priced in (21bp), and markets are expecting another one by year-end. Our...

ElliottwaveSpecialist

The dollar has found good support since yesterday afternoon when some US data prompted a USD/risk-off rally. The Leading Index printed a positive month-on-month number for the first time in two years, likely thanks to the strong equity performance and a weather-related rebound in the average work week. Existing home sales also surprised on the upside, rising from...