MNI US OPEN - US CPI Key for June Policy Prospects

NEWS

FED (MNI): Fed's Bostic Sees One Rate Cut, Flexible On Path
Atlanta Federal Reserve President Raphael Bostic reiterated Tuesday his view for one interest rate cut in 2024, but he remains open to adjusting his view should the economic picture change.“ The risks are balanced and given that the U.S. economy has been so robust and so strong and so resilient, I can’t take off the possibility that the rate cuts may even have to move further out,” Bostic told Yahoo Finance, also repeating he anticipates the Fed will reduce borrowing costs in the fourth quarter. (See: MNI INTERVIEW: Fed To Cut Once Or Twice At Most In 2024 - Pakko)

NEW ZEALAND (MNI): MPC Holds The Line
The Reserve Bank of New Zealand made few changes to its assumptions and outlook following its call to hold the official cash rate at 5.5% today, noting the economy is developing as expected, and refraining from switching to an overt easing stance. The Monetary Policy Committee has now held the OCR at 5.5% since May 2023. Today’s move was largely anticipated and followed strong signalling from the Reserve and Governor Adrian Orr that inflation expectations must remain anchored as CPI continues to grow well above its 1-3% target range.

JAPAN (BBG): Former FX Chief Says Intervention an Option for Overly Weak Yen
Japan’s former currency chief says intervention is among the options to address an excessively weak yen, speaking ahead of US inflation data that may nudge the yen past a level closely watched by market players. “I strongly feel the yen’s recent weakness has gone too far,” Takehiko Nakao, former vice minister for international affairs at the finance ministry, said in an interview Wednesday.

JAPAN (MNI): Higher Import Prices To Drive Policy - BOJ's Ueda
Bank of Japan Governor Kazuo Ueda said on Wednesday the BOJ would consider monetary policy change should the risk of the underlying inflation rate rising above 2% increase due to higher import prices driven by the weak yen. Ueda told lawmakers that the BOJ has no plan to adjust monetary policy directly immediately after foreign exchange rates moves.

CHINA/TAIWAN (BBG): China’s Xi to Meet Ex-Taiwan Leader in Beijing in Landmark Event
Chinese leader Xi Jinping will meet former Taiwan President Ma Ying-jeou in Beijing for a landmark sitdown spotlighting the Communist Party’s willingness to talk to the island’s opposition. The two men will meet Wednesday, the opposition Kuomintang that Ma once led said in a statement. Ma was president of the self-ruled democracy from 2008 to 2016, and becomes the first former Taiwan leader to visit the Chinese capital.

CHINA (MNI): Fitch China Outlook Downgrade Regrettable - MoF
Fitch's sovereign credit rating methodology fails to reflect the impact of recent fiscal policy in promoting growth and stabilising macroeconomic leverage, according to an official from the Ministry of Finance. In a media interview, the MoF representative said it was regrettable that Fitch decided to recently downgrade the outlook for China's sovereign credit rating. Overall, Beijing’s resolution of local government debt was progressing with risks generally controllable, the MoF spokesperson added.

CHINA (MNI): China Targets Standards Update To Support Trade-ins
Authorities will conduct 294 revisions to equipment standards by 2025 to support the government's drive for equipment renewal and consumer goods exchange, according to a notice on the State Administration for Market Regulation website. The government will focus on improving green product and high-end quality certifications, and establish a catalog for consumer product quality and safety, the notice said.

SOUTH KOREA (MNI): Board To Consider Hold At 3.5%, Inflation In
The Bank of Korea monetary policy board will strongly consider holding its policy rate at 3.50% following Friday’s meeting as the bank continues to pay close attention to still stubborn inflation. Focus will shift to whether BOK Governor Rhee Chang-yong will maintain his vigilance over the inflation outlook, while carefully weighing the risk of a slower economy and rising household debt, according to a person familiar with South Korea's economy and monetary policy.

SOUTH AFRICA (BBG): ANC Support Plunges in South African Poll as Zuma Party Surges
Support for South Africa’s ruling African National Congress is plunging and a party backed by former President Jacob Zuma may become the country’s third-biggest after next month’s election, a new opinion poll shows. The ANC, which has ruled South Africa since the end of apartheid, may garner just 37% support in the May 29 vote, while Zuma’s uMkhonto weSizwe Party, or MKP, may get 13%, the Social Research Foundation said in comments sent to Bloomberg on Wednesday, citing a poll it carried out this month.

THAILAND (BBG): Thai Central Bank Holds Rate, Deepening Rift With Government
Thailand’s central bank left interest rates unchanged Wednesday, underlining the limits of monetary policy to support economic growth especially when fiscal settings are loose. The Monetary Policy Committee voted 5-2 to maintain the one-day repurchase rate steady at a decade-high 2.50%, as predicted by 17 of the 24 economists surveyed by Bloomberg. In doing so, the rate panel refused to yield to the demands of Prime Minister Srettha Thavisin to cut borrowing costs to spur credit in Southeast Asia’s second-largest economy.

INDUSTRIAL METALS (BBG): Copper Extends Surge on Bets That Demand is Poised to Boom
Copper rose from its highest close since mid-2022 as industrial metals posted broad gains on gathering optimism over world demand. The macroeconomic backdrop for metals — with global manufacturing starting to improve and the Federal Reserve widely expected to cut rates — is pushing prices higher. All contracts on the London Metal Exchange have gained this year.

DATA

JAPAN (MNI): Mar CGPI Rises 0.8% Y/Y, Higher Import Prices
Japan's corporate goods price index rose 0.8% y/y in March vs. February’s 0.7%, the second straight acceleration, while imports posted their second straight rise, up 1.4% following the prior month's 0.2% gain, data released by the Bank of Japan showed on Wednesday. The CGPI rose 0.2% m/m in March after rising 0.2% in February.

NORWAY (MNI): Norges Bank Will View Soft March CPI Against Recent Wage Agreements
Norwegian March CPI-ATE was 4.5% Y/Y, below the consensus and Norges Bank March MPR forecast of 4.7% (and Feb’s 4.9%). The headline rate was also soft, at 3.9% Y/Y (vs 4.2% cons and Norges Bank forecast, 4.5% prior). While today’s data in isolation may generate speculation re: an earlier cut vs. the Bank’s current guidance (September), it must be assessed alongside the stronger-than-expected union wage agreements struck over the weekend. Food and non-alcoholic beverages (a notable source of uncertainty amongst analysts pre-release), fell 1.9% M/M NSA (vs -0.6% prior), pulling down CPI-ATE.

MNI US CPI Preview: A Key Framing Of Trends With June Cut Seen As A Coin Toss

EXECUTIVE SUMMARY

• Consensus puts core CPI inflation at 0.3% M/M in March with some skew towards a ‘low’ 0.3 reading.
• Most of the usual drivers are seen exerting downward pressure after a stronger than expected 0.36% M/M in Feb, most notably used car prices after their surprise increase.
• OER inflation will again be watched as methodological-related noise remains top of mind, markets will likely be sensitive to supercore inflation after two particularly strong prints, and we watch for latest supply side effects across core goods categories.
• With the central leadership of the FOMC seemingly looking through near-term "bumps" and eyeing reasons to proceed with rate cuts, a softer-than-expected March core CPI reading (below 0.27% M/M, particularly if it translates cleanly to PCE) would likely re-center implied 2024 cut pricing back toward the March Dot Plot's base case 75bp (from around 63bp at the time of writing) and nudge up June pricing from around 50% currently to 60-65%.

PLEASE FIND THE FULL REPORT HERE:

USCPIPrevApr2024.pdf

FOREX: NZD Firms on RBNZ, Tilting AUD/NZD Off Highs

• NZD trades firmer ahead of the NY crossover, with NZD/USD cresting at a recovery high of 0.6078 on the back of the unchanged RBNZ rate decision overnight. While the OCR was kept unchanged at 5.50% (alongside expectations), the stressing of the importance of anchored inflation expectations added a hawkish tilt to the statement, helping NZD outperform vs. broader G10.
• The USD Index has reverted back above the 50-dma support - a level tested during Tuesday trade, but not firmly broken. A soft CPI release today could put the level under pressure once more, crossing today at 103.965.
• Elsewhere, GBP trades better, with GBP/USD testing the 1.2700 handle at typing to keep pressure on the weekly recovery high of 1.2709 - first major resistance in the pair.
• JPY is among the weakest despite yesterday's report that the BoJ could upgrade their inflation view in light of recent pay settlements, keeping USD/JPY within striking distance of major resistance at the psychological Y152.00 level.
• US inflation data takes focus going forward, with markets expecting Y/Y CPI to tick higher to 3.4%, while ex-food and energy moderates to 3.7%. The Bank of Canada rate decision also crosses, at which markets expect no change to headline policy rates of 5.00%. The speaker schedule includes Fed's Bowman, Goolsbee and Barkin.

EGBS: Trading Near Intraday Highs Ahead Of US CPI

Core/semi-core EGBs operate close to intraday highs, with Bunds +14 ticks and OATs +12 ticks at typing. While OAT futures trade near last Thursday’s highs, Bunds remain short of those levels.

• Little in the way of notable macro catalysts to note this morning, ahead of US CPI at 1330BST/1430CET.
• Despite yesterday’s gains, a bearish technical threat in Bund futures remains present. A break of 133.48, Mar 27 high, is needed to reinstate a bullish theme.
• The impending 15-year Bund supply may be helping to cap rallies in Bund in the run-up to the bidding deadline.
• German cash yields are 1 to 2bps lower today, while 10-year periphery spreads to Bunds are once again tighter with the exception of Portugal (where E1.5bln of OT supply is due this morning).

GILTS: Little Changed On The Day, Well-Received Auction Provides Support

Gilt futures are at the peak of their narrow 21-tick range, last +6 at 98.94.

• The contract holds below 99.00, with familiar technical parameters in place.
• Cash gilt yields are little changed on the day.
• A light bid was seen in the front end of the curve on the back of solid demand metrics at the latest Mar ’27 gilt auction.
• SONIA futures & BoE-dated OIS are little changed on the day, showing ~72bp of ’24 cuts.
• UK headline flow remains light, with broader macro focus on today’s U.S. CPI release.
• The proximity to that datapoint seems to be limiting wider market activity.

EQUITIES: Primary Uptrend in Eurostoxx 50 Intact

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 reinforces this condition. The contract has breached bull channel support drawn from the Jan 17 low. 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. The break of support around the 20-day EMA suggests potential for a deeper retracement.

• Japan's NIKKEI closed lower by 191.32 pts or -0.48% at 39581.81 and the TOPIX ended 11.9 pts lower or -0.43% at 2742.79.
• Elsewhere, in China the SHANGHAI closed lower by 21.202 pts or -0.7% at 3027.335 and the HANG SENG ended 304.93 pts higher or +1.81% at 17132.73.
• Across Europe, Germany's DAX trades higher by 111.38 pts or +0.62% at 18186.92, FTSE 100 higher by 45.88 pts or +0.58% at 7980.75, CAC 40 up 40 pts or +0.5% at 8088.93 and Euro Stoxx 50 up 34.86 pts or +0.7% at 5025.59.
• Dow Jones mini up 45 pts or +0.11% at 39241, S&P 500 mini up 6 pts or +0.11% at 5266.25, NASDAQ mini up 34.75 pts or +0.19% at 18395.25.

COMMODITIES: Gold Bullish Price Sequence Persists to New Highs

The trend condition in Gold remains bullish and the yellow metal is trading at this week’s highs. The move higher maintains the bullish price sequence of higher highs and higher lows and note that moving average studies are in a bull-mode condition, reflecting positive market sentiment. 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 $0.4 or +0.47% at $85.58
• Natural Gas up $0.04 or +2.3% at $1.908
• Gold spot up $0.51 or +0.02% at $2352.81
• Copper up $2.05 or +0.48% at $430.75
• Silver down $0.06 or -0.2% at $28.0964
• Platinum down $0.65 or -0.07% at $979.99