MNI US OPEN - USD/JPY Off Lows as Authorities Stop Short of Intervention Confirmation

NEWS

JAPAN (MNI): Kanda Briefs Press, But No Intervention Hints Post-Meeting
JPY trades weaker following a briefing for press after a meeting with the BoJ, FSA and MoF representatives. Kanda stated that 4% moves in currencies are "not moderate" and that the authorities will take appropriate action against excessive moves in FX market. Kanda reiterated the authorities' stance that they maintain a readiness to act.

JAPAN (BBG): Japan Finance Officials Gather After Yen Slumps to 34-Year Low

Officials from Japan’s Ministry of Finance, the Bank of Japan and Financial Services Agency are meeting to discuss international financial markets in their first three-way meeting since late May, according to an emailed statement. The unscheduled meeting comes after Japan’s currency slipped earlier Wednesday to the weakest level versus the dollar in about 34 years. Attending the meeting are Vice Finance Minister for International Affairs Masato Kanda, FSA Commissioner Teruhisa Kurita and the BOJ’s head of policy, Seiichi Shimizu. Kanda is set to brief reporters after the meeting.

BOJ (MNI): Easy Financial Conditions to Continue - BOJ's Ueda

Bank of Japan Governor Kazuo Ueda said on Wednesday the BOJ would maintain easy financial conditions to for now as medium- to long-term inflation expectations and underlying inflation are in the process of rising to 2%. The Bank will not change the size of its Japanese government bond holdings and will continue to buy JGBs at the same price as before, indicating the stock-effects of its holdings on yields continued, and will continue to buy JGBs in a flexible manner should yields rise sharply, Ueda said.

BOJ (MNI): Policy to Normalise Steadily - BOJ's Tamura

Bank of Japan board member Naoki Tamura said on Wednesday the BOJ must normalise policy slowly but steadily and end its unprecedented large-scale easy settings. Tamura told business leaders in Aomori City that the outlook for monetary policy will depend on developments of economic, price and financial markets, however, he did not elaborate on when and how the BOJ will advance normalisation. He added the Bank's recent decision, which ended negative rates and yield curve control, as the first step to normalise monetary policy.

RIKSBANK (MNI): Riksbank Holds, Sees First Cut in May or June

The Riksbank left its policy rate on hold at 4.0% at its March meeting and said it could make its first cycle cut in either May or June. "If the inflation prospects remain favourable, the policy rate may well be cut in May or June," the Board stated, making the case for "gradual cuts in the policy rate." The Swedish central bank's board remains concerned about potential krona weakness or fresh adverse geo-political developments driving inflation up again.

US/CHINA (BBG): President Xi Meets With U.S. Business Leaders

MNI (Beijing) Chinese President Xi said he hopes people from all walks of life in the U.S. and China can have more contact and exchanges in future, during a meeting with U.S. business and academic leaders at the Great Hall in Beijing on Wednesday, according to state media CCTV news. Sino-U.S. relations were a history of friendly exchanges between the two peoples, Xi noted.

ECB (BBG): ECB’s Kazaks Doesn’t Dispute Market View of June Rate Cut

Inflation is on the back foot and June may be a good time for the European Central Bank to begin lowering borrowing costs, as investors expect, according to Governing Council member Martins Kazaks. “Uncertainty is high and here we need to be very cautious — we don’t want inflation to revive — but at the moment it looks like this dragon is pinned to the ground,” Kazaks told LTV Wednesday in Riga, Latvia, where he heads the central bank.

ECB (MNI): ECB's Cipollone Wants Swift Cuts If Forecasts Confirmed

The European Central Bank should swiftly dial back its restrictive policy stance if incoming data confirm its March economic projections, Executive Board Member Piero Cipollone said in a speech on Wednesday. Regarding the future path of rates, Cipollone said an “increased confidence in a timely return of inflation to our target should then allow forward-looking information to regain prominence in our reaction function.”

FRANCE (BBG): France Delays New EU-Canada Trade Deal Vote After Senate Setback

The French government will delay holding another vote on the European Union’s free-trade deal with Canada, after an embarrassing setback in the Senate. Last week, a coalition of senators from communists to conservatives coalesced to vote against ratifying the Comprehensive Economic and Trade Agreement, known as CETA. To advance the full ratification of the agreement — which is already in force provisionally — the bill will need to return to the National Assembly.

CHINA (MNI): China to Continue Housing Relaxation as Developers Suffer

MNI (Beijing) China will continue to ease homebuying restrictions and increase financing support for developers, but authorities must accelerate and intensify policies and implement unconventional measures to help the market bottom as quickly as possible to hasten the recovery, advisors told MNI. Beijing and Shanghai may lift home-purchase limits from suburbs this year, said Guo Xiangyu, director of research with the Research Center for Real Estate Finance at PBC School of Finance at Tsinghua University, a prominent think tank.

CHINA (MNI): Improve Asian Financial Safety Net - PBOC Governor

MNI (Beijing) China will work with Asian countries to explore strengthening the regional financial safety net and improve the effectiveness of the Chiang Mai Initiative (CMI), according to Pan Gongsheng, governor of the People’s Bank of China. Pan said Asian nations can together advocate for reforms to the IMF quota system that does not effectively reflect the relative positions of member countries in the global economy.

NEW ZEALAND (MNI): Government's 2024 Growth & Inflation Estimates Revised Down Sharply

The new government has released its Budget Policy Statement which will guide its decisions for the 2024 budget which will be published on 30 May. But the scenario it is starting with involves slower growth and tax revenues, and as a result a surplus is not likely until 2028, but that is not a "given". 2024 growth has been revised down sharply since the Half Year Update to 0.1% from 1.5% but 2025 has been revised up to 2.1% from 1.5%. Inflation has been revised down sharply for 2024 to 3.3%, close to the top of the RBNZ's band, from 4.1% in the mid-year update, with it easing to 2.2% in 2025.

COMMODITIES (BBG): Oil May Hit $100 Following Russian Output Cuts, JPMorgan Warns

Brent has the potential to rally to $100/bbl this year if Russia’s recent decision to cut production isn’t balanced out by other counter-measures, according to JPMorgan Chase & Co. While the bank opted to leave price forecasts unchanged for now, Moscow’s “actions could push Brent oil price to $90 already in April, reach mid-$90 by May and close to $100 by September,” analysts including Natasha Kaneva said in a March 27 note

DATA

SPAIN DATA (MNI): Electricity Prices Jump as Expected But Core Lower

• SPAIN MAR FLASH HICP +1.3% M/M, +3.2% Y/Y
• SPAIN MAR FLASH CORE CPI +3.3% Y/Y
• SPAIN MAR FLASH CPI +0.8% M/M, +3.2% Y/Y

Spanish preliminary March HICP came in slightly softer than expected at +3.2%Y/Y (vs +3.3% cons and +2.9% prior), with the sequential reading at +1.3% M/M (vs +1.4% cons and +0.4% prior). The national CPI measure came in above expectations at 3.2% Y/Y (vs +3.1% cons; +2.8% prior) and +0.8% M/M (+0.6% cons; +0.4% prior). Core CPI undershot expectations, printing at +3.3% Y/Y (vs +3.4% cons; +3.5% prior): the 7th consecutive decline and the lowest value since February 2022.

FRANCE MAR CONSUMER SENTIMENT 91 (MNI)

MNI CHINA LIQUIDITY INDEX: First PBOC Net Fund Drain in 15Mths

• MAR CHINA LIQUIDITY CONDITION INDEX 33.3 VS FEB 26.8

MNI (Beijing) The People’s Bank of China net-drained liquidity for the first time in 15 months as authorities stepped up action to address so-called “idle funds”, which are used for arbitrage with little benefit to the real economy, the latest MNI Liquidity Conditions Index showed. Liquidity conditions though remained reasonable. Traders concerns’ over a lack of demand in the economy persisted despite some bright spots in February’s data releases.

AUSTRALIA DATA (MNI): Feb CPI Unchanged at 3.4% Y/Y

• AUSTRALIA MONTHLY FEB CPI 0.5% MM, 3.4% YY

The Australian monthly CPI indicator rose 3.4% y/y over February, below expectations and flat against January, Australian Bureau of Statistics data showed Wednesday. The monthly indicator has held at the same level for three consecutive months. Housing (+4.6%), food and non-alcoholic beverages (+3.6%), alcohol and tobacco (+6.1%) and insurance and financial services (+8.4%) were the most significant contributors. Rental inflation growth, a focus for the Reserve Bank of Australia, increased 10bp to 7.6%.

FOREX: JPY Surges as Markets Wary of Intervention Risks

• Having touched fresh multi-decade highs overnight, USD/JPY trades sharply lower headed into NY hours as wires confirmed that the Bank of Japan, Ministry of Finance and FSA are set to meet to discuss financial markets, raising speculation that currency market intervention could be imminent. USD/JPY corrected sharply lower on the headlines, fading 50 pips to new daily lows, and opening a ~75 pip cap with the overnight high. Resultingly, JPY is comfortably the strongest performer in G10.
• No surprise to see a spike in volumes for JPY futures on these Japanese headlines - over 8,000 contracts traded inside 60 seconds - but worth noting we saw similar moves and volumes spikes on a handful of occasions in October last year that generated speculation of intervention (e.g. ~10k on Oct26, ~20k on Oct17), after which the BoJ confirmed that no intervention had taken place at all over that month.
• The USD is mixed, with the USD Index broadly flat - early strength was reversed on BoJ headlines, allowing the likes of EUR/USD, GBP/USD to edge off daily lows. NOK is the poorest performer on the day, following oil market softer, as Brent crude futures edge just over 1% off highs.
• The Riksbank kept policy unchanged - as expected - but flagged May and June as potential meetings at which the bank could ease policy going forward. EUR/SEK traded firmer in response, but stopped short of a material test on the 200-dma at 11.5173.
• Focus shifts to the post-meeting media briefing from Japan's top currency diplomat and an appearance from Fed's Waller, who is set to address the economic outlook.

US TSYS: Little Changed, Futures in Tight Ranges on Light Volume

Tsys are back to little changed on the day.

• Mixed Spanish CPI data limited any late Asia/Early London buying, before speculation surrounding Japanese intervention in the JPY picked up, dominating desk talk.
• TYM4 -0-02 at 110-18+, sticking to a very narrow 0-04 range on sub-par volume of ~168K.
• Yesterday’s range in the contract and familiar technical levels are intact.
• MBA mortgage applications headlines a very limited NY data calendar.
• Fed Governor Waller will speak today.
• FOMC-dated OIS shows ~77bp of ’24 cuts, with ~19.5bp of easing priced through June, sticking to familiar ranges.
• On the supply front, 7-Year Tsy & 2-Year FRN will be seen.

EGBS: Below Consensus Spanish Flash CPI-induced Bounce Fades

Core/semi-core EGBs have faded from intraday highs attained following below-consensus Spanish inflation data, but remain firmer on the day. A reminder that French and Italian flash inflation prints are due on Friday.

• Spanish March flash inflation was lower than expected on the HICP and core CPI measure, but few details are available in the preliminary release.
• This morning, Latvian CB Governor Kazaks did not object to market pricing for a June rate cut. This is another instance of one of the traditional hawks moving toward the market/GC base case, akin to Muller yesterday.
• Executive Board member Cipollone struck an unsurprisngly dovish tone later in the morning.
• Spillovers from developments in Japan r.e. BoJ/MoF FX speculation have been limited thus far.
• Bunds are +14 ticks at 132.89. The March 25 high at 133.28 remains the first support.
• German and French cash yields are unchanged to 2bps lower on the day, while 10-year periphery spreads to Bunds are tighter with the exception of Greece. The 10-year BTP/Bund spread sits a touch below the 130bps handle at typing.
• Looking ahead, the EC's consumer and business survey for March will be of interest at 1000GMT/1100CET.

GILTS: Off Highs Alongside Peers

Gilts back from early highs alongside core global peers.

• Mixed Spanish CPI data helped limit early rallies before intervention speculation re: the JPY picked up.
• Futures last +2 at 99.49 (99.44-79 range).
• Cash gilt yields are little changed to 1bp higher..
• SONIA futures are also off highs, -1.0 to +1.0 through the blues.
• BoE-dated OIS prices ~74bp of ’24 cuts, little changed on the day
• The local calendar is very light today, with just the minutes of the BoE’s latest FPC meeting due. That shouldn’t be a market mover.

EQUITIES: Eurostoxx 50 Futures Reach Fresh Cycle High

A bullish trend condition in Eurostoxx 50 futures remains intact and the contract traded to a fresh cycle high Tuesday. The climb once again confirms a resumption of the uptrend as the contract pulls away from the 5000.00 handle. Moving average studies remain in a bull-mode position, highlighting positive market sentiment. Sights are on 5074.7, a Fibonacci projection. Initial firm support is at 4926.10, the 20-day EMA. The trend condition in S&P E-Minis is unchanged and remains bullish. Last week’s extension reinforces this theme and the break of 5257.25, Mar 8 high, confirmed a resumption of the uptrend. Note that moving average studies remain in a bull-mode position reflecting positive market sentiment. Sights are on 5407.23, the top of a bull channel drawn from the Jan 17 low. Initial firm support is 5218.00, the 20-day EMA. A move lower is considered corrective.

• Japan's NIKKEI closed higher by 364.7 pts or +0.9% at 40762.73 and the TOPIX ended 18.48 pts higher or +0.66% at 2799.28.
• Elsewhere, in China the SHANGHAI closed lower by 38.342 pts or -1.26% at 2993.139 and the HANG SENG ended 225.48 pts lower or -1.36% at 16392.84.
• Across Europe, Germany's DAX trades higher by 34.13 pts or +0.19% at 18418.64, FTSE 100 lower by 9.62 pts or -0.12% at 7921.32, CAC 40 up 1.3 pts or +0.02% at 8186.05 and Euro Stoxx 50 up 7.92 pts or +0.16% at 5072.1.
• Dow Jones mini up 124 pts or +0.31% at 39803, S&P 500 mini up 17 pts or +0.32% at 5282.25, NASDAQ mini up 60.25 pts or +0.33% at 18509.25.

COMMODITIES: Gold Briefly Trades to $2200 Tuesday, Conditions Remain Bullish

A bull theme in WTI futures remains intact and the latest pullback appears to be a correction. Recent gains resulted in a break of $79.87, the Mar 1 high. The move higher confirms a resumption of the uptrend that has been in place since mid-December last year. Sights are on $83.87 next, the Oct 20 ‘23 high. A break of this level would open $84.87, the Sep 15 ‘23 high and a key resistance. Support to watch is $79.83, the 20-day EMA. The trend condition in Gold remains bullish and the move higher on Mar 21, reinforces this condition. The initial rally delivered another all-time high and confirmed a resumption of the primary uptrend. Moving average studies are in a bull-mode condition, reflecting positive market sentiment. This signals scope for a climb towards $2230.1, a Fibonacci projection. Key short-term trend support has been defined at $2146.2, the Mar 18 low.

• WTI Crude down $0.63 or -0.77% at $81.01
• Natural Gas down $0.01 or -0.39% at $1.781
• Gold spot down $1.11 or -0.05% at $2178.17
• Copper down $2.25 or -0.56% at $398.7
• Silver down $0.04 or -0.14% at $24.4248
• Platinum down $6.09 or -0.67% at $900.05