Markets:
- Gold up $6 to $1817
- US 10-year yields down 3.6 bps to 4.07%
- WTI crude down 56-cents to $75.76
- S&P 500 up 0.4%
- GBP leads, USD lags
It was a session that was strong on questions but light on answers as the US dollar slumped. The risk mood was positive so there was a reflexive selloff in the US dollar that erased some of the moves on Friday, particularly in GBP and EUR. What caused the better mood? It’s tough to say but I sense that the market is hesitant to price in Fed hikes beyond what’s in the dot plot, so we’re stuck waiting until March 22 for a new set of forecasts. Last week Fed officials had a chance to hint at more hikes but instead hinted at higher for longer and data dependence. I’m looking towards Waller on Thursday for another potential shift.
US dollar selling picked up after durable goods but that was correlation not causation as the details of the report were strong. Later, the Dallas Fed highlighted the confusion in the market as the numbers softened, including a ninth straight negative number in new orders. Despite that, the corporate comments in the report were all over the place with some talking about a fresh pickup and others emphasizing a worsening outlook.
What was behind the cable rally? I’d love to say it was a Brexit deal at long last but it’s been ages since that was a GBP-mover so I don’t think that’s the case. There isn’t a better explanation but I’d highlight that technicals in cable were better than elsewhere as the February lows held last week.
Month-end flows could have been a factor in USD-selling, though Citi seems to think we should see USD buying. That could be something to watch for tomorrow.