Morning Commentary: “Everything is Coming up Roses”

Foreign Exchange - Morning Commentary

“Everything is Coming up Roses”

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Alan Rose
Alan Rose
Foreign Exchange Senior Trader
We regularly remind our readers of the erratic nature of the markets as they seesaw back and forth between optimism and pessimism. This has been a steady feature of the markets going back to Q4 and we have no reason to believe this will change in the short run. For today, “everything is coming up roses,” the world is upbeat and positive, and the markets are back working in-sync. Global equities, G7 interest rates, and commodity prices are all higher and the U.S. dollar is weaker across the board as commodity-linked currencies are outperforming.
The backdrop for this optimism comes from a one-two punch of better-than-expected Asian and EZ data (see below) along with renewed optimism surrounding Brexit and positive story lines regarding the U.S.-China trade negotiations. Commodity prices have continued to march higher this year and have largely ignored the short term developments in global stocks and bonds.
Oil prices have been marching higher all year and are sitting at four-month highs; part of this move is related to OPEC production cuts. The same is true for iron ore and copper prices; avocado prices jumped by an amazing 34% yesterday on fears of the U.S. Southern Border being shut down and a lack of supply. How long this optimism and upbeat nature will last is anybody’s guess, but at least for today, the global economic picture looks like spring has arrived.
  • Australia reported better-than-expected February retail sales (+0.8%) and a much larger-than-expected trade surplus.
  • China reported a better-than-expected Service PMI for March where it rose to 54.4.
  • The EZ reported March service and composite PMI readings, and they both beat expectations rising respectively to 53.3 and 51.6.
  • One negative was the U.S ADP employment report that precedes the official labor market report on Friday. Consensus estimates were for a gain of 175,000 but the number badly missed coming in at only 129,000. For now, U.S. interest rates have ignored this news and remain firmly higher on the session.
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