💼 Macro-News round-up


🇺🇸 Absolutely in line with our predictions, Thomas Barkin, President of the Richmond Fed, expressed less confidence in the trajectory of rate drops but stated that he anticipated high rates will further slow the economy and bring inflation down to the Fed’s target of 2%. According to Barkin, the robust job market gives the central bank time to become confident that inflation is declining steadily before taking any action, but remember, that may have started to change after last Friday’s negative employment report.

🇯🇵 Japan: Once more, the value of the yen declined, although not to the extent that Tokyo would be alarmed. After Japan’s top currency official Masato Kanda stated that the government shouldn’t step in if the market is operating properly, the currency dropped, and USDJPY passed 154.

📉 After last week’s close, with a worse-than-expected US jobs report on Friday, and a rebound in the unemployment rate, the market seems to have rallied again. The SP500 has returned to trade above 5200 points, the US 2-year bond has fallen in yields to 4.8%, down from 5% momentarily last week. The dollar index, on the other hand, has also lost strength, although it is still holding above 105 points. Taking advantage of these circumstances, the EURUSD has rallied again, momentarily trading above 1.08.

🌍 Europe: the PMI services data published yesterday in Europe show slight improvements. We have France, Germany and Spain reporting a services PMI above 50 and improving on the previous period’s data. However, German factory orders fall to -0.4% from minus 0.8% in the previous period. A positive result of 0.4% was expected. Germany’s trade balance was also slightly weaker.

📈 Nevertheless, as usual, European stock markets continue to move towards record highs, and the Dax40 is almost at 18,300 points, just over 300 points away from a new all-time high.

🇬🇧 UK: We have an interesting week for the pound, as there will be important data from the UK.
Today, UK retail sales fell to -4.4%, a sharp drop, considering that 1.6% was expected, and having had retail sales in the previous period of 3.2%. Additionally, the Halifax house price index is weaker than expected, although improving from the previous period. Finally, the construction PMI comes out stronger than expected, coming in at 53 over 50.4 expected.

🏢 The highlight comes on Thursday, with the Bank of England’s interest rate decision and Governor Bailey’s speech. I would bet that we will not see any change in interest rates, the UK inflation rate remains at 3.2%. Unfortunately, the UK economy faces a complicated scenario, on the one hand, a negative growth in Q4 2023, which would demand immediate monetary stimulus. On the other hand, an inflation rate that is far from the 2% target, which, according to the textbook, would force them to maintain rates or even raise them.

🌍 Geopolitics:

🇮🇱 Although Israel’s war council unanimously rejected a plan for a cease-fire that it claimed was “far from Israel’s necessary demands,” the militant Palestinian group Hamas claimed to have accepted the cease-fire. In order to put military pressure on Hamas, Israel threatened to carry out “its operation in Rafah.”

💰 The future of oil is expected to be positive, with OPEC+ policy acting as the primary driver in a complicated global market. Overall, there should be enough strength for Brent to break through above $90 per barrel. Supported by Riyadh, the production cuts are now anticipated to continue until the second half. Furthermore, a few governments that have lagged behind in cutting are currently implementing catch-up measures. The cartel’s readiness to give up some market share supports higher pricing in light of the increasing output of non-OPEC+ countries.

⛽ For the moment, the crude oil market is cautious and at four-week lows, falling below $83 a barrel Brent. Gold, meanwhile, is strong, but stable and below the highs around $2300 an ounce, having peaked 4 weeks ago at over $2430 an ounce.