Stocks slip, bonds slide in muted holiday week

Headlines

* USD edges lower in light trade as ranges hold, data mixed

* Stocks choppy, fall for a third day in a row with few catalysts

* China files WTO complaint over US EV subsidies

FX: USD rose marginally in another narrow range trading day. Quarter and month-end demand for dollars is said to be solid. Economic data was mixed with consumer confidence falling while durable goods orders rose more than forecast. There was no Fedspeak with most focus on Friday’s inflation figures.

EUR traded around the 200-day and 50-day SMA at 1.0837/40. It seems like ECB officials are lining up a June rate cut. This gives time for the Governing Council to see more convincing evidence on wage data, and inflation too. The latter comes next week.

GBP edged higher but is yet to test Friday’s high at 1.2675 or the 50-day SMA at 1.2681. We heard from the BoE’s Mann. She reasserted her hawkish stance, even though she voted for unchanged rates last week. The 200-day SMA looks at be solid support at 1.2592.

USD/JPY continues to consolidate below the intervention high at 151.94. Verbal chatter by MoF officials had little effect again. A hit to the major is most probably going to come from US Treasury yields breaking down rather than yen strength. The yuan is trading steadier via the PBoC so is also not helping the yen.

AUD traded in a narrow range and kept below the 50-day and 200-day SMA at 0.6548/50. CNH gains on PBoC fixing helped underpin support for the aussie and kiwi.  

Stocks: US equities closed marginally in the red with a late session sell-off. The broad-based benchmark S&P 500 closed 0.28% lower at 5203. The tech-laden Nasdaq 100 lost 0.36% to finish at 18,210. The Dow Jones settled 0.08% down at 39,282. Most sectors were in the red with only Financials, Healthcare and Consumer Staples in positive territory. Tesla was up 2.92% after the EV makers started offering one-month trials for its Full Self-Driving to US customers.

Asian futures are mildly in the green. APAC stocks traded choppy in relatively quiet trade heading into month and quarter end. The ASX 200 fell with tech losses and soft consumer confidence data.

Gold pushed higher to $2200 before pulling back. A soft dollar is helping while safe haven buying is likely with geopolitical tensions raised. The spike top from last week is $2,222.

Day Ahead – Australia CPI

CPI for February is seen rising to 3.6% y/y from 3.4%. The monthly January figure matched the December print, which marked the lowest m/m inflation rate since November 2021. Economists say that with February being the mid-month of the quarter, we’ll get an update on many. But there’s uncertainty over electricity prices, which are expected to increase as government energy rebates end.

The data follows the recent RBA decision which saw the central bank keep the cash rate at 4.35%, as expected. But there was a twist as previously, the bank had still explicitly maintained the door open for further hikes. Instead, policymakers simply stated that ‘the board is not ruling anything in or out’, which the markets took as a relatively more dovish signal. Markets are pricing the first rate cut in August. That has recently shifted from September.

Chart of the Day – AUD/USD range trading but holidng 0.65

The March RBA meeting effectively dropped the tighening bias. However, recent exceptionally strong labour market data may make additional dovish singals more tricky. A total of around 50bps of easing is priced in, starting in the third quarter.

The major has been tracking sideways recently with prices trading around the halfway point of the Q4 rally at 0.6571. The 200-day SMA and 50-day SMAs are just below here at 0.6548/50. The year-to-date low is at 0.6442 from mid-February. Resistance is the March top at 0.6667 with a Fib retracement level at 0.6641.

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