πŸ“° Macro-News round-up

MarketNews

πŸ’¬ Jerome Powell, the chair of the Federal Reserve, said that the bank is almost at the point where it will feel comfortable cutting interest rates. “It’ll be appropriate to start reducing the level of restriction when we do get that confidence, and we’re not far from it,” Powell stated on Thursday in response to inquiries from the Senate Banking Committee.

πŸ’‘ The comments are surprising, as since his last appearance, we have heard several Fed members make much more cautious comments about the risks of an early cut.

πŸ“‰ However, the reading of the markets was positive. The dollar weakened, demand for bonds rose, and US stock markets resumed their bullish tone, with SP500 futures currently at a new high of 5230 points.

πŸ“Š In any case, today’s data, NFP and unemployment rate, will be key, as the employment reports are crucial considering that persistent inflation is rooted in labor costs.

πŸ’± The European Central Bank may lower interest rates prior to the summer break, according to Bundesbank President Joachim Nagel. Nagel emphasises that the choice will be based on the available evidence and sees an increasing likelihood of a rate cut. This viewpoint supports the hypothesis that, prior to policymakers’ summer break, the ECB may reduce borrowing costs. In his remarks, Nagel emphasised the improving chances for a reduction in interest rates during a table.media podcast.

πŸ’Ό On Thursday, ECB policymakers said they were getting ready for the first interest rate decrease, which would likely happen in June. “We did not discuss cuts for this meeting, but we are just beginning to discuss the dialling back of our restrictive stance,” Lagarde, ECB President.

πŸ—“οΈ Prior to that, on April 11, the ECB has another policy meeting scheduled.”We will know a little more in April, but we will know a lot more in June,” Lagarde stated.

πŸ’Ή The European Central Bank (ECB) reduced its forecast for price increase this year from 2.7% to 2.3% in fresh quarterly economic projections announced on Thursday. The ECB now expects inflation to drop to 1.9% in the summer of 2025 and remain there until the end of 2026.

πŸ” But Lagarde was cautious, stating that more proof was required before the ECB reduced interest rates. “There is a definite decline (in inflation) which is underway and we are making good progress towards our inflation target,” Lagarde stated. “We are more confident as a result, but we are not sufficiently confident.”

✨ Remember, the EU inflation rate in November 2023 was lower than the current rate, standing at 2.4%. Inflation has been sideways since then, and they know it.
πŸ’Ό The EU growth rate in Q4 of 2023, published a few minutes ago, has presented no changes with respect to the initial data. Europe is growing at 0.1% annualized, and the last quarter of 2023 grew by 0%.

πŸ“‰ The PPIs for France and Germany continue to show a negative balance, indicating falling prices, but as we have commented in previous reports, inflation now seems to be on the services side, rather than on the production side.

πŸ’Ό From a market standpoint, an interesting event has taken place. Despite the lack of growth in Europe, in stark contrast to the growth of the US economy, and despite the ECB not having as firm a commitment as the FED to cut interest rates, the EuroStoxx has outperformed the SP500 in returns generated so far this year.

πŸ‡―πŸ‡΅ Japan: Based on recent comments in the JiJi platform report, the Bank of Japan plans a new monetary policy framework, and according to some sources, is leaning toward ending negative rates in March, the key determinant will be the outcome of the March 13 wage negotiations.

πŸ’° Remember, the USDJPY is experiencing historical price movements. It is one of the most interesting pairs these days.

πŸ₯‡ Gold: For the sixteenth consecutive month, last month saw the addition of gold to China’s reserves by the central bank. Amidst the nation’s economic troubles, buyers have also rushed to gold on the local Chinese market. According to figures from the Swiss Federal Administration, Swiss exports to China, which are typically a reliable indicator of Chinese demand for the precious metal, more than doubled to 77.8 tonnes in January from December, while shipments to Hong Kong increased by nearly seven times to 44.6 tonnes.

⬇️ But gold ETF holdings are still falling; as of yesterday, total known holdings had decreased by 135.4 koz to 82.1 moz. With net outflows for the month totaling 285.9koz, the total amount of gold ETF holdings has dropped to its lowest level since December 2019.

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