Morning Report

March 27, 2024

“The yen’s 34-year low is the FX headline this morning, with intervention threats ramping up in Tokyo that could cause some fireworks in the markets. A hawkish speech from the Fed’s Waller could pile the pressure on USD/JPY this evening, in today’s most significant market mover.”

Sam Cornford – Head of Trading


Main Headlines

The National Bank of Hungary reduced its base rate by 75 basis points to 8.25% on Tuesday, as anticipated. This move comes amid a one-year low for the forint, partly due to an escalating conflict between the bank and the government. The NBH stated that monetary policy would now transition into a new phase, with the rate of reductions slowing down in the second quarter.

According to the Lloyds Bank Business Barometer survey published today, British businesses have scaled back their plans for staffing and wage increases this month. The measure of staffing plans, which reflects the difference between firms planning to hire and those planning cuts, dropped to 27% from February’s nearly two-year high of 36%. The report suggested that the National Living Wage increase would soon begin to impact firms’ bottom lines.


Sterling has taken some time to consolidate as the quarter draws to a close, with eyes now on April’s events for some further clarity on the trajectory of the Bank of England. As has been noted across the financial media, the pound has historically performed its best in April – for this to materialise again this year, we would likely need some sign that Governor Bailey’s newfound optimism for imminent rate cuts is overstretched, whether in some upside inflation or wage surprises, or some more hawkish pushback from some members of the MPC. Chief hawk Mann said yesterday that the markets are pricing in too many cuts for her liking, but ultimately changed her mind about voting for a hike because consumers are becoming less willing to pay higher prices.


The markets are quite content with their pricing for the ECB’s policy trajectory, even with Spanish CPI printing above expectations at 3.2% this morning and up from 2.8% in February. The picture will build for the eurozone with the Italian and French figures on Friday, and then Germany joins next Tuesday – with policymakers all pointing towards June, it would take a big surprise to put markets off a cut in that meeting, and so the biggest potential impact of this data would likely be on whether April becomes a possibility if there is a downside surprise. The ECB’s Cipollone will have his say today, who was particularly dovish in February when he argued that rate cuts were ‘fast approaching’ and saw little reason to keep policy restrictive with demand so low.


We are yet to be handed any clear directional signals from the US data last week, with a positive recovery in February’s durable goods orders contrasting with the lowest consumer confidence figure since November. The Fed’s Waller, however, who speaks this evening, is a known market mover and is assumed to be close in thinking to Powell – his last speech from February ‘What’s the rush?’ rowed back on his rate cut optimism as he argued that the strong US economy gives the Fed the luxury of time and allows policymakers to be prudent in easing policy. After the big moves he triggered in Q4, his speech will be the biggest highlight ahead of Friday’s core PCE.

The one pair where we have seen some significant movement is USD/JPY, which surged to a 34-year high this morning – above where Japanese authorities intervened 18 months ago – as a BoJ board member advocated a slow path of policy normalisation, and prompted traders to tentatively test Tokyo’s threats of intervention.


The equity markets have been rather subdued in the holiday-shortened week and Wall St continues to inch modestly lower in a largely directionless trade. Japan’s Nikkei index is the exception, however, leaping 0.9% by the close driven by a sharply weaker yen that saw traders snap up cheaper stocks.

Main Economic Events (All Times CET)

1:30am: Australian CPI y/y
9:00am: Spanish Flash CPI y/y
3:00pm: Swiss National Bank Quarterly Bulletin
11:00pm: Fed’s Waller speaks


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