MNI US OPEN - BoE '24 Rate Cut Pricing Recedes to New Lows

NEWS

US/CHINA (BBG): Biden Upgrades Japan Defense Ties Due to ‘Dangerous’ China
The US and Japan unveiled plans to “enable seamless integration” of military operations as President Joe Biden hosted Prime Minister Fumio Kishida in a visit that underscored the Asian nation’s importance as a key ally in countering China. The two leaders announced a list of initiatives on Wednesday aimed at boosting defense and intelligence cooperation, with projects ranging from missiles to moon landings. The move comes amid growing concerns over Beijing, with Biden and Kishida condemning China’s “dangerous” actions in the region.

US (NYT): Trump Loses His Third Try in a Week to Delay Manhattan Trial
Donald J. Trump was turned down when he asked an appeals court — again — to stave off his prosecution on charges that he faked business records to cover up a sex scandal.

FED (MNI): 'Concerning' CPI Pushes Back Cuts - Fed's Kashkari
Minneapolis Fed President Neel Kashkari said Wednesday the "concerning" CPI inflation report means the central bank will likely have to wait longer before reducing interest rates. "My colleagues and I have all said we will cut interest rates once we get convinced that inflation is well on its way back into our 2% target," he told PBS Newshour.

CANADA (MNI): BOC Rate Cuts Are Justified: Ex Adviser Ambler
Canada's central bank has room to start a series of interest-rate reductions beginning in June as inflation settles down and tight monetary conditions threaten an economic soft landing, former BOC adviser Steve Ambler told MNI. Governor Tiff Macklem could have justified lowering the 5% overnight rate on Wednesday instead of his decision to hold according to Ambler, a retired Universite du Quebec a Montreal professor and a member of CD Howe's shadow monetary council.

CANADA (MNI): BOC Set To Cut In June Or July: Ex Deputy Beaudry
Canada's central bank appears poised to lower interest rates at one of the next two meetings in June or July, former deputy Paul Beaudry told lawmakers hours after officials held their key borrowing cost at 5% for a sixth straight meeting.

ECB (MNI): MNI Preview - The Final Staging Post Before A June Cut
Given the lack of material new information since the last policy meeting, and with the ECB previously steering markets towards a rate cut in June, policy will remain on hold at the April meeting. With the June cut close to fully priced by markets, there is similarly little incentive for the ECB to upscale its communication at this juncture. With that in mind, any adjustment to the official communication would represent a minor surprise at this week’s meeting.

BOE (BBG): BOE’s Greene Joins Hawkish Voices Warning Against Early Rate Cut
Bank of England policymaker Megan Greene said interest rate cuts in the UK “should still be a way off” because Britain has a higher risk of persistent inflation than the US and other countries. The remarks in the Financial Times signal that Greene is tilted toward the hawkish side of the UK central bank’s nine-member Monetary Policy Committee, which is considering when to lower interests rates from their highest in 16 years.

BOJ (MNI): Ex-BOJ's Maeda Sees Terminal Rate Above 1%
The Bank of Japan could eventually raise its overnight rate above 1%, about double the expectations of private economists, assuming it can stabilise inflation at around 2%, a former BOJ chief economist and executive director in charge of monetary policy told MNI.

BOJ (MNI): Oct Price Revisions Key To Further Rate Hikes
Corporate goods and services price revisions made available around October and following the publication of revised wage-hike data at smaller firms will fuel chances of a Bank of Japan rate hike later in the year, MNI understands. BOJ Governor Kazuo Ueda in a recent interview with a local newspaper said the probability of achieving the bank’s 2% inflation target will increase over the northern summer and autumn when hefty wage hikes won in the spring wage negotiations are reflected in prices.

SOUTH KOREA (Yonhap): S. Korean Prime Minister, Yoon’s Aides Offer to Resign
South Korean Prime Minister Han Duck-soo expressed his will to resign over the defeat in the general election, Yonhap News says, without citing anyone.Yoon’s chief of staff, chief aide for policies and all senior secretaries also offered to resign

CHINA (MNI): China Small Lenders To Cut Deposit Rates Further
Chinese small lenders will likely continue to cut deposit rates under the pressure of narrowed interest margin as authorities push for the reduction of financing costs across the economy, according to Financial News, a paper under the People’s Bank of China. A large number of small- and medium-sized banks across the country have announced reductions in their fixed-term deposit rates since the beginning of April, covering various deposit products with terms ranging from three months to three years, with rate reductions ranging from 5-45 basis points, the paper reported, citing experts.

CHINA (MNI): PBOC Wary Of Rapid Long-dated CGB Yield Decline
The People’s Bank of China will continue to monitor the longer-dated Chinese government bond market, adding supply and control over leverage to help guide the yield closer to the present 2.5% one-year medium-term lending facility rate, an advisor and economists told MNI. The rapid and irrational fall of long-term CGB yields could trap liquidity in the financial system and raise the risk of a bond-market correction, said Li Peijia, head of the China financial team at the Bank of China Research Institute.

CHINA (MNI): China’s Hainan To Launch “Tourist Wallet”
China’s southern province of Hainan will launch a “tourist wallet” allowing inbound visitors to exchange foreign currency into electronic renminbi on their mobile phones, which can be used at any location where Alipay and WeChat are available, Liu Xiaoming, deputy Secretary of the Hainan Provincial Party Committee told reporters on Thursday.

SINGAPORE (MNI): MAS Preview - On Hold as Growth & Inflation Holding Up
The MAS is expected to keep all of its major policy parameters unchanged at tomorrow’s April policy meeting. This is the strong sell-side consensus and also our firm bias. Growth and inflation pressures are holding up, which should reduce the need for the central bank to turn more dovish. Q1 growth, released at the same time as the policy outcome, is expected to show y/y momentum improving to 3%.

SOUTH KOREA (MNI): BoK Preview - On Hold Amid Sticky Headline Inflation
The firm sell-side consensus and our own bias rests firmly with an on-hold outcome at tomorrow's BoK policy meeting. Sticky headline inflation pressures, along with still elevated consumer inflation expectations, suggest there is no need to rush into an easing bias.

DATA

CHINA (MNI): China March CPI Lower Than Market Expectation~
China's Consumer Price Index ran behind market expectation, gaining 0.1% y/y in March, lower than the previous 0.7% y/y increase and underperforming the market consensus of 0.4%, data from the National Bureau of Statistics showed Thursday. Falling food and transportation services prices drove March's print, the NBS said. Pork prices, a main CPI driver, declined 2.4% y/y, compared with last 0.2% y/y increase. Services prices gained 0.8% y/y, led by declining tourism and air travel prices. CPI fell 1.0% on a monthly basis, led by food prices, which was impacted by sufficient supply.

MNI: NORWAY FEB MAINLAND GDP -0.2% M/M, AGG GDP -0.9% M/M

EGBS: Lower Following Central Bank Rate Cut Repricing

Core/semi-core EGBs are off lows but remain weaker alongside core FI peers this morning, as rate cut expectations across the Fed/BoE/ECB have pulled back.

• Spillover from yesterday’s higher-than-expected US CPI report continues to set the tone.
• Ahead of today’s meeting, ECB-dated OIS contracts price 75bps of cuts through the remainder of ’24, down from around 90bps before last week’s US NFP report.
• Bunds are -33 ticks at 131.61. Attention is on key support at 131.23, the Feb 29 low. Clearance of this level would confirm a resumption of the downtrend that started late last year.
• German cash yields are 1 to 2 bps higher today, with 5/10-year tenors underperforming.
• The 10-year BTP/Bund spread is 1.4bps wider at 138.6bps, with today’s 3/7/15-year BTP supply likely weighing into bidding deadline.
• In the midst of the ECB decision/press conference, US PPI will also garner cross-market interest at 1330BST/1430CET following yesterday’s CPI report.

GILTS: Off Lows, Hawkish BoE Repricing Dominates, Futures Tested Key Support

Hawkish-leaning comments from BoE’s Greene combined with the extension of the hawkish global central bank repricing, weighing on gilts.

• Futures breached psychological support at 97.00, before basing around the Feb 29 low and bear trigger (lows of 96.82 registered thus far).
• The contract has recovered to ~97.15.
• Cash gilt yields are 4-7bp higher across the curve, with the belly leading the sell off.
• 5s30s flattens but remains within the range seen in recent weeks.
• BoE-dated OIS shows ~49.5bp of cuts, with ~28.5bp of cuts priced through the September MPC (the latter briefly faded blow pricing 25bp of cuts through that juncture).
• The BoE’s credit conditions survey was more resilient than many expected but wasn’t a market mover.
• The latest ECB decision and U.S. PPI reading are set to generate a lot of attention in the coming hours.
• Elsewhere, BoE’s Greene will speak at 17:30 London, covering “lessons learnt from the last economic crisis.”

FOREX: USD/JPY Resumes Incline, Clears Wednesday High

• The post-US CPI rally in USD/JPY persists, with the pair making light work of yesterday's highs to print a new multi-decade best at 153.29. Gains for the pair come despite the background threat of intervention from the Japanese authorities, with markets on watch for any volume or price action surge that could signal the Bank of Japan are looking to prop the JPY price.
• Despite the upside in USD/JPY, CHF is the poorest performer in G10, as the continued to rollback of implied pricing for Federal Reserve, BoE and ECB rate cut cycles opens the rate differential gap with the SNB, who have already begun their rate cut cycle. NOK takes place at the other-end of the table, stronger against all others as the firmer oil backdrop continues to prop the currency. Fraught geopolitical tensions continue to support oil-tied currencies, after the US warned yesterday that they see an Iranian attack on Israel as "imminent".
• The ECB rate decision comes alongside the US crossover, with markets on watch for any signal that the ECB will proceed with a first rate cut of the cycle at the June meeting. Ahead of the decision, EUR/USD is consolidating, holding close to the entirety of the slide off US inflation data yesterday, keeping support at 1.0725 within range and marking the bear trigger for the Thursday session.
• Focus ahead turns to the weekly US jobless claims data and the March PPI release - particularly in light of yesterday's hotter-than-expected CPI release, after which

EQUITIES: Stock Weakness Deemed Corrective Post-CPI

The trend condition in S&P E-Minis is unchanged and remains bullish. The recent move down highlights a short-term corrective cycle and last week's sell-off plus yesterday’s move lower, reinforces this condition. The primary uptrend in Eurostoxx 50 futures remains intact and recent weakness is considered corrective. The move down is allowing an overbought condition to unwind.

• Japan's NIKKEI closed lower by 139.18 pts or -0.35% at 39442.63 and the TOPIX ended 4.17 pts higher or +0.15% at 2746.96.
• Elsewhere, in China the SHANGHAI closed higher by 6.911 pts or +0.23% at 3034.246 and the HANG SENG ended 44.14 pts lower or -0.26% at 17095.03.
• Across Europe, Germany's DAX trades lower by 15.23 pts or -0.08% at 18083.09, FTSE 100 lower by 11.78 pts or -0.15% at 7949.61, CAC 40 up 30.11 pts or +0.37% at 8075.59 and Euro Stoxx 50 up 1.17 pts or +0.02% at 5002.02.
• Dow Jones mini down 31 pts or -0.08% at 38723, S&P 500 mini down 4.75 pts or -0.09% at 5204, NASDAQ mini down 4.5 pts or -0.02% at 18196.

COMMODITIES: WTI Futures Bull Trend Remains Intact

The trend condition in Gold remains bullish and the yellow metal is trading closer to this week’s highs. The latest climb maintains the bullish price sequence of higher highs and higher lows and note that moving average studies are in a bull-mode condition. A bull theme in WTI futures remains intact and the latest pullback is considered corrective. Last week’s rally reinforced current conditions and confirmed a resumption of the uptrend. The contract has traded through $84.87, the Sep 15 ‘23 high.

• WTI Crude up $0.3 or +0.35% at $86.45
• Natural Gas down $0.01 or -0.27% at $1.881
• Gold spot down $3.34 or -0.14% at $2331.02
• Copper down $1.1 or -0.26% at $427
• Silver down $0.03 or -0.11% at $27.903
• Platinum up $7.08 or +0.73% at $973.36