Morning Commentary: Turning Point, Tipping Point or More of the Same

A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.

Turning Point, Tipping Point or More of the Same Share this story: Alan Rose Foreign Exchange Senior Trader

As we arrive this morning, equity, interest rate, and foreign exchange markets are consolidating, and what little news has come out overnight has just barely moved the needle for many asset classes. Regarding foreign exchange, the USD/JPY traded in an incredible narrow 18 point range overnight and has been trading in a very narrow range over the past three days implying that many investors and traders are uncertain about what lies ahead for this key currency.   Much can be said for many other asset classes as they continue to chew over the same turf over and over again as short term bullish and bearish trends come, go and end back to square one.  Overlaid on top of all this near term uncertainty looms the key U.S. Jobs report for the month of March to be released tomorrow morning which could be a game changer or leave us still uncertain about the economy and/or the direction of equities, interest rates, and foreign exchange.   Tomorrow’s U.S. jobs report could possible change the market dynamics as it could carry implications for future Fed policy. Will job gains recover from the poor performance of February or will the slowing signals in other parts of the economy (housing, manufacturing) cause another weak print? How will the market react to the key average hourly earnings (AHE) metrics if we get a print above expectations signaling higher inflation? How will equities react to higher U.S. interest rates if both job gains and inflation are above expectations? All of these are important questions and we will have to await tomorrow’s report at 5:30 am PST to see how investors react. HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT: The Indian rupee is one of the few currencies to have seen some movement overnight. The Reserve Bank of India cut interest rates for the second consecutive meeting by 25 bps to 6.00%. The overall tone of the meeting was dovish as they lowered their inflation outlook and said they stand ready to use all available tools to ensure liquidity to the banking system. The Indian rupee is down over 1.00% on the day. German factory orders for February were extremely weak falling by 4.2% against expectations for a gain of 0.3%. January factory orders were down by 2.1% and the YoY factory orders are down 8.4%. Unlike the Japanese yen, the euro has fallen in 10 of the past 11 trading sessions and is slightly weaker on today’s session.

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