Morning Commentary: This is a Time to Hunker Down!
A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.
This is a Time to Hunker Down!
Share this story:
Alan Rose Foreign Exchange Senior Trader
This is not a time to be a hero. Market volatility and the news cycle is playing havoc with investors as the sheer amount of whipsaws is hard to fathom, and it is not a time for those who are faint of heart. Equity markets rejoiced yesterday on the back of Fed Chairman Powell’s comments that they are watching closely for signs that heightened trade friction is denting the economic outlook which could lead to a Fed rate cut. Today’s U.S. economic data adds to the concerns that the U.S. is not an island and is not immune from a global economic slowdown.
Today’s May U.S. ADP Employment report (private sector report and a precursor to Friday’s labor department report) shocked the market as the report badly missed the consensus forecasts. Market expectations were for gains of 185,000, but the actual number showed only gains of 27,000 with a downward revision to April; this is the fewest amount of workers added in any month since 2010.
While U.S. equity futures look to open higher, U.S. interest rates have collapsed again today sending the U.S. dollar lower for the fourth day in a row. U.S. 2-year interest rates fell by a whopping 11 bps before stabilizing and have made a new low for the year. The probability of a Fed rate cut for the upcoming June meeting has jumped from a 6% probability yesterday to 28% today. Continue to expect divergence between equities and interest rates; equities like the idea of a Fed rate cut and lower interest rates, and the interest rate market is hypersensitive to weak economic data in the short term. The U.S. dollar (DXY) has been consolidating during all the extreme volatility in May and June but is beginning to look toppish.
HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT:
Earlier today, the European Commission indicated that the Italian budget excess warrants disciplinary action and a possible fine of €3.5 billion for violating European budgetary guidelines. Italy has made insufficient progress in reducing its mountain of debt. This a complicated and convoluted process as the EC has never levied a fine against a country for excessive debt and will be an ongoing theme in the fx markets hindering euro appreciation. This news story caused the euro to weaken prior to the release of the ADP report.
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:
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.
Now accepting scholarship apps Celebrating 40 years of service -- A loan to an innovative company -- Affording your dream home -- Mergers and a new branch in Raleigh View this email in your browser Forward to a friend
Here's what this indicator is saying about US stocks right now. ACTIVE INVESTOR WEEKLY EDITION: January 21, 2022 View in a browser FIDELITY VIEWPOINTS ® WEEKLY EDITION: January 21, 2022 Bollinger band stock signal Here's what this indicator is saying about US stocks right now. Read more CHART OF THE WEEK Inflation and corporate consolidation US industries have become