ECB In Focus, While Australia Pokes The Panda

The euro is in a little more than a quarter-cent range today below $1.2050.  Yesterday, it briefly traded a hundredth of a cent below $1.20 but recovered to finish near session highs. On Tuesday, it had reached $1.2080, its best level since March 3.  The trendline connecting the January high (~$1.2350) and the February high (~$1.2245) comes in today near $1.2125.  Sterling stalled in Asia at yesterday's high near $1.3950 and was sold in early European turnover back through $1.3890 before bids emerged.  Yesterday's low was near $1.3885.  The week's high was set on Tuesday, a little above $1.40.  Chart support is seen in the $1.3830-$1.3860 area (FXE, FXB).  

America

The Bank of Canada announced yesterday it was reducing its bond-buying by a quarter to CAD3 bln a week.  The move was widely expected.  Last April, the Bank was buying CAD5 bln a week and pulled back last October to CAD4 bln.  At the time, it suggested its stimulative impact was unchanged as it shifted its buying to longer-dated bonds.  Yesterday's move was not accompanied by a similar announcement.  On the contrary, Bank of Canada Governor Macklem brought forward when the economic slack would be absorbed to mid-2022.  The market took the bait and brought forward the first rate hike until the middle of next year.  

The US is playing down the seeming optimism expressed by some Iranian leaders about progress on talks.  Some Iranian officials suggested that a deal was 60%-70% complete, but both sides, apparently addressing domestic audiences, had different messages.  The bottom line is that indirect talks will resume next week to focus on the sequencing of actions.  What sanctions are the US willing to lift in exchange for what concrete steps by Iran.  The US has suggested it is willing to consider lifting numerous sanctions on oil, industry, and finance.  The recent attack on Iran's top nuclear facility received little official denouncement from Brussels or the US. However, if such an attack took place in nearly any other country, the cyber attack would still be making headlines. Getting the US and Iran back in compliance with the agreement will take more time, and a deal is hoped for before the June 18 Iranian elections.  Iran produces heavy sour crude oil, and its capacity is estimated at 3-4 mln barrels a day.  

The US reports weekly jobless claims today.  A small bounce is expected after the outsized 193k decline in the week ending April 9.  Leading economic indicators, existing home sales, and the KC Fed manufacturing survey are also on tap but typically are not market-movers.  The virtual climate summit hosted by the Biden administration may make for headlines but are unlikely to have much immediate impact. Mexico reports its mid-April bi-weekly CPI.  The headline may slip a touch, and the core rate increase may slow, but the year-over-year rate is likely to firm toward 6% from 5.22%.  The increase will if anything, strengthen the market's conviction that the central bank will not have an opportunity to resume its easing cycle.  

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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