A regime of little consensus

This Daily Digest will cover:

• 🇯🇵 JPY unwinds
• 🇩🇪 German inflation the figure to watch
• 🔎 Equities a cross-current
• 🇪🇺 EUR to grind higher

Yesterday’s unorthodox markets provided further confirmation that we are in a regime of little consensus. ‘USD up, equities up’ was not what I had on my bingo card. The yen’s safe haven status benefitted it in outsize proportions last week as its traditional compatriots in this field (USD, CHF) suffered from regional banking crises. An unwinding of crisis sentiment and scaled back bets on Fed dovishness have hit USD/JPY from both sides, dragging cross-yen pairs back up with it. We’ll learn more about the dollar today through the release of fourth-quarter GDP figures, plus speeches by the Fed’s Thomas Barkin, Susan Collins and Neel Kashkari.

There is a chorus of European data out today with preliminary March inflation readings in Spain and Germany. The German figures will of course be watched with particular attention – consensus expectations are for a deceleration from 8.7% to 7.3%. With the ECB’s explicit hawkish tone still being data dependent, the figures are set to be an important driver of the market’s rate expectations. With even notable doves (Lane) talking up rate expectations, consensus here, contrasted against a Fed with an uncertain outlook, will keep the EUR supported and on track for a test of 1.1000, despite scope for counter-trend corrections.

EUR grinding up on rate differentials is my only firm view, although I would not be surprised if it just trades its range today. Intraday FX moves have been messy with considerable swings in equity markets proving a cross-current. Month end flows could also distort moves. With non–market moving data out today, I see BTC and crypto in general consolidating for a period. As always though, good luck out there.

James Laidlaw
OTC Trader