Forex Investment and Currency Trading

Equities were mixed on Thursday, with Asian markets little changed, Europe rising over 1% in most cases, while US markets were lost between 1-2%. Front-month WTI rose USD 1.35/bbl to USD 107.20. That contract has risen in price each day this week and is now the highest since Tuesday 18 Mar. The futures market moved again to price in more aggressive easing at the 30 Apr FOMC meeting. The market now gives a 54% chance of a 25bps cut and 46% chance of a 50bps cut, whereas on Wednesday there was a 64% chance of a 25bps cut and a 36% chance of a 50bps cut. One week ago, the market was expecting a 50bps cut with a 56% probability. Two-year UST yields were little changed and ten-year yields rose 4bps, taking the 2s-10s spread to just over 180bps.

The day ahead in the US brings the Personal Income and Expenditure Report (Feb) and the U. Michigan Consumer Confidence (March final). After that, the next key data release is the ISM Manufacturing Index (Mar) on Monday. In Fedspeak on Friday, Philly Fed President Plosser speaks on Sub-Saharan Monetary Policy in Capetown. This could be potentially interesting as Plosser is on the hawkish side of the FOMC and he dissented at the last FOMC meeting, preferring less aggressive easing.

The key component of the Personal Income and Expenditure Report is the core PCE deflator, which is the Fed’s preferred measure of core consumer prices. The core PCE deflator is expected to print 0.1% m/m from 0.3% prior, following the flat reading for core CPI (Feb) released earlier in the month. That would bring the y/y figure to 2.1% from 2.2%.

The U. Mich Consumer Confidence figure is expected to fall to 70.0 from 70.5 in the preliminary Mar reading. Higher retail gas prices and the slowing labour market will keep consumer confidence under pressure for the foreseeable future.