Morning Commentary: A Small Spark of Life

Foreign Exchange - Morning Commentary

A Small Spark of Life

Share this story:
Alan Rose
Alan Rose
Foreign Exchange Senior Trader
Prior to 5:30 am PST, markets were extremely quiet with small narrow ranges to most asset classes as markets remained largely caught between bullish and bearish camps leaving investors uncertain about which path to choose. Prior to 5:30 am PST, the euro had traded in an almost unfathomable range of just 15 bps since we left last night! For those not that familiar with the history of free floating exchange rates, this is almost unheard of, especially for being the second most important currency to the U.S. dollar. But this pattern of microscopic movements in foreign exchange rates has been ongoing for months despite the volatility in interest rates, equities and commodity prices. Continue to expect more of the same.
All markets were jolted this morning as two pieces of economic data from the U.S. surprised investors and traders as the data came in away from expectations and caused U.S. interest rates to jump, pulling the U.S. dollar to higher levels. U.S. PPI for March came in much stronger than consensus rising by 0.6% bringing the YoY rate up from 1.9% to 2.2%. PPI, ex-food and energy also beat expectations rising by 0.3% bringing the YoY rate down from 2.5% to 2.4%. U.S. jobless claims decreased to 196,000 beating all estimates, bringing the four-week average to 207,000 which is the lowest level since December 1969.
The Federal Reserve has signaled that they are going to be patient and are prepared to move interest rates higher or lower as needed. Market expectations regarding the Fed's next move have shifted slightly from the beginning of the month. On April 1, market expectations were looking at the probability of a fed rate cut of nearly 70% in January of 2020. Since last week, that probability has dropped to 57%.  This slight change in expectations has provided little fodder for any additional market movements. More data will be needed as the market and the Fed have both become overly data dependent.
  • The U.K. and the EU have agreed to extend the Brexit deadline to October 31. This was a compromise by both sides; the U.K. had asked for a June 30 deadline but the EU favored a longer one up to one year. Neither the U.K. or EU want a no-deal Brexit outcome; the markets continue to price in some sort of soft Brexit final outcome. The British pound is little changed on this news.
If we can help you with any Foreign Exchange needs, please email or call (800) 447‑4133.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Facebook Twitter LinkedIn Google Plus YouTube
Non-deposit investment products:
Are not FDIC insured,
Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and
Are subject to investment risks, including possible loss of the principal invested.
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Unsubscribe from this list  |  Update email preferences
This message has been sent to Please do not reply to this email. To ensure the delivery of future emails, please add to your email address book or safe sender list.
Copyright ©2019 City National Bank – All Rights Reserved.
350 South Grand Avenue, 12th Floor, Los Angeles, CA 90071
City National Bank is a subsidiary of Royal Bank of Canada.
Equal Housing Lender
NMLSR ID# 536994 | City National Bank Member FDIC


Popular posts from this blog