Market Briefing: Trading Remains Subdued After Months of Turmoil
Currency markets are largely becalmed this morning, with the dollar fading against most of its rivals as Treasury volatility continues its slide. The British pound is the only major currency lighting fireworks, rising to a session high after a bigger-than-expected surge in wages.
China’s economy rebounded more strongly than expected in the first quarter, raising hopes that growth could hit the government’s 5-percent target this year. According to the National Bureau of Statistics, gross domestic product growth accelerated to 4.5 percent year-on-year from 2.9 percent in the last quarter of 2022. Separately, retail sales jumped 10.6 percent in March compared with a year earlier, and industrial production climbed by a more-disappointing 3.9 percent. In a more worrisome sign, property investment fell 7.2 percent in March from the same month last year, with the slide accelerating from a 5.7 percent drop in January and February, even as overall credit indicators surged.
China’s recovery could help buoy commodity exporters and currencies across Southeast Asia, but isn’t likely to lift growth prospects in the advanced economies. By running huge (and growing) trade surpluses with the world, China subtracts from consumer demand on a net basis, even as it captures a bigger share of global growth.
The pound surged and odds on a rate increase at the Bank of England’s May meeting climbed after data showed an unexpectedly-large jump in wages in February. The Office for National Statistics reported a 6.6 percent year-over-year increase in average earnings excluding bonuses in the three months through February, well above the the 6.2 percent pace expected in markets. The unemployment rate inched up to 3.8 percent from 3.7, and the number of job vacancies fell by 47,000, remaining historically elevated at 1.1 million. If tomorrow’s inflation data follows suit in topping expectations, the likelihood of a rate hike should firm further, putting the pound on a trajectory that could see it break back through the 1.25 mark against the dollar.
In an otherwise-quiet US calendar today, housing starts are seen falling to an annualized 1.4 million in March from 1.45 in the prior month.
Canada will drop its latest inflation figures shortly, with markets positioned for a 4.3-percent year-over-year rise in headline prices for March, down from the 5.2 percent recorded in February. An above-expectations print could provide limited support to the loonie—few expect the Bank of Canada to react in a decisive manner to a single print, implying a drop in real yields—but still-firm median and trimmed inflation readings could help push the currency modestly higher.
KARL SCHAMOTTA, CHIEF MARKET STRATEGIST
CAD Consumer Price Index, March
USD New York Federal Reserve Services Business Activity, April
GBP Consumer Price Index, March
CAD Housing Starts, March
USD Department of Energy Weekly Inventories
USD Federal Reserve Beige Book
NZD Consumer Price Index, Q1
MXN Retail Sales, February
USD Weekly Jobless Claims
USD Federal Reserve Speech, Waller
EUR S&P Global Eurozone Purchasing Manager Index, April Preliminary
CAD Retail Sales, February
USD S&P Global US Purchasing Manager Index, April Preliminary
USD Baker Hughes Weekly Rig Count