In a relatively subdued trading week, the Kiwi takes the top spot as positive broad risk sentiment recovered after bond yields fell, and on recovery optimism sparked by more proposed stimulus measures.
Business sentiment updates were largely positive as well from around the globe, likely contributing to the risk-on lean this week. And as usual in risk-on environments, the Japanese yen didn’t fare well, actually closing out as the biggest loser of the week.
Notable News & Economic Updates:
- Stocks fall to start the week as impacts continue to be felt from margin-call rout
- IMF to boost global outlook again, warns financial conditions uncertain
- Home prices across globe hit records, prompting worries of bubble
- CME launching micro bitcoin futures in May
- PayPal now allows crypto spending at millions of merchants
- The 10-year Treasury yield touched its highest level since January 2020 on Tuesday
- Pfizer-BioNTech says Covid vaccine is 100% effective in kids ages 12 to 15
- Goldman Sachs is close to offering bitcoin and other digital assets to its wealth management clients
- OPEC-JMMC panel says uncertainties limit oil price recovery
- Asia’s factory recovery picks up but cost pressures emerge
- Bitcoin price surge may be driving up interest in China’s digital yuan, central bank says
- COVID-19 vaccines open to 16-year-olds in these 20 U.S. states, 18 more next week
Another Relatively Quiet Week in Markets
Not much to talk about in the financial markets this week as volatility across the different asset classes remained relatively contained. Most of the action came early on Monday and Tuesday as traders were pulled between several themes, including rising bond yields, OPEC output expectations, and last Friday’s Margin call at Archegos Capital Management, before settling into a slow groove on Wednesday.
It’s likely that as fears of contagion from Archegos Capital Management’s blow up faded, and the lack of fresh major catalysts / news headlines, traders decided to stayed on the sidelines ahead of Friday’s U.S. employment situation report and the Easter holiday.
Broad risk sentiment leaned positive for most of the week, again, likely on fading contagion risks from the Archegos Capital Management story, but possibly also on improving business sentiment data released this week, as well as late week positive headlines from the covid vaccine story (e.g., Pfizer-BioNTech says Covid vaccine is 100% effective in kids ages 12 to 15, Japan secured more Pfizer vaccines to immunize elderly population)
Most asset classes are likely to close relatively near their opening prices on Monday, with exception to Bitcoin, which seems to have benefitted from a slew of arguably bullish headlines this week of further institutional / mainstream adoption (e.g., Visa now settles payments in USDC stablecoin on Ethereum blockchain, Goldman Sachs is close to offering bitcoin and other digital assets to its wealth management clients, PayPal now allows crypto spending at millions of merchants)
The U.S. dollar spent much of the week in the green against the rest of the major currencies, likely supported by another round of rising bond yields. But USD bulls luck changed on Thursday, possibly on rising positive risk sentiment. This may have been sparked by positive covid headlines, most notably from Pfizer, as well as better-than-expected reads on business sentiment updates from around the globe.
- Texax Manufacturing Survey surged 28 points to 48.0, its highest reading in the survey’s 17-year history.
- Fed will not keep interest rates low for government’s benefit, Waller says
- NY Fed’s Williams says he is optimistic about the economy
- Quarles says Fed very committed to pushing inflation above 2%
- Dallas Fed chief calls for interest rate ‘action’ when benchmarks met
- Biden Details $2 Trillion Plan to Rebuild Infrastructure and Reshape the Economy
- U.S. adds 517,000 private-sector jobs in March, ADP says, as economy speeds up
- U.S. pending home sales fall more than expected in February
- Weekly jobless claims higher than expected despite signs of labor market improvement
- McConnell says GOP won’t support Biden’s infrastructure plan, vows to fight Democratic agenda
- ISM Manufacturing PMI increased to 64.7 in March vs. 60.8 February
- U.S. Jobs report blows past expectations as payrolls boom by 916,000 in March
Sterling nearly takes the top spot this week, likely support by both the general risk-on vibe, but likely on the positive rhetoric from BOE officials, covid developments in the U.K. and better-than-expected GDP data.
- BoE’s Vlieghe says economy will need help even with swift rebound
- Covid antibodies in half of UK population and festivals to go ahead
- U.K. BRC price shop index down by another 2.4% in March
- UK GDP shoots up after worst year on record amid non-stop ‘string of positive news’
The euro spent most of the week in the red against the majors, likely on the continued pressure from the market that’s been fueled by the that renewed covid lockdowns in Europe, which have been bringing down economic growth expectations.
- German import prices rise for first time since 2019
- The estimated annual inflation of Spanish CPI in March 2021 is 1.3%, according to the flash indicator prepared by the INE
- ECB Governor warns against sharp policy tilt when crisis passes
- German Unemployment Slightly Lower in March
- Euro area annual inflation up to 1.3% m/m in March 2021
- French President Macron under pressure to lock down as Covid-19 hospitalizations soar
- France March factory activity growth fastest since 2000 -PMI
- Spanish factory activity grows in March at fastest pace since 2006 -PMI
The franc’s choppy, net loss against the majors despite positive economic updates from Switzerland indicates that broad risk sentiment was the top influence in CHF price action this week.
- The KOF Economic Barometer rose to 117.8 points in March and now is as high as it was last in summer 2010.
- SNB Quarterly Bulletin for Q1 2021
- Swiss consumer prices increased by 0.3% in March
The Canadian dollar is once again a net gainer, likely on both positive economic updates as well as the broad risk-on lean. It was enough to avoid the Loonie from being dragged lower by oil prices this week.
- Canada’s economy: GDP grew in January and February
- In February, the IPPI increased 2.6% m/m; The RMPI increased 6.6% m/m
The Kiwi was a net gainer this week despite weaker-than-expected updates from New Zealand. That makes the probability high that Kiwi was trading off of risk sentiment and counter currency flows.
- New Zealand building approvals plummet in February
- New Zealand ANZ business confidence index down from 0.0 to -4.1
The Australian dollar wasn’t able to join its Comdoll cousins to net gains this week as the new set of lockdowns overshadowed arguably net positive economic updates.
- Australia announces fresh set of lockdowns in Brisbane
- Australian jobs stimulus program ends, hiring losses expected
- Australia Building Permits rise 21.6% in February 2021
- Recovery in Australian manufacturing gathered further pace in March
- Australia’s trade surplus below consensus in February
- Australia’s Queensland state premier says Brisbane lockdown to end
- Australia retail sales fell 0.8% m/m; +9.1% y/y in February
We saw selling pressure on the Japanese yen all week, likely on the broad risk-on sentiment discussed above, as well as net negative economic updates from Japan. The growing geopolitical risks developing between Japan and China (China issues strong warning to Japan over ‘negative moves’ in East China Sea dispute) may have been a contributor as well.