Overnight Asian currencies have strengthened after the finance ministers of Japan, South Korea and the US released a joint statement addressing concerns over a resurgent dollar, looking to restore a sense of confidence in the region's financial markets and stabilise the currencies. Expectations for rate cuts in the US we tempered this week following economic data and Powell noting it’s taking “longer than expected” to hit 2% target, leading Asian currencies to weaken against the Dollar. After the statement, the Korean won rose as much as 1.1% against the dollar to 1371.72 Won and the yen gained up to 0.3% to hit ¥153.96.
Following the UK inflation data yesterday, sterling strengthened as traders pushed back their bets on interest rate cuts from the Bank of England. Swap markets are now expecting the BoE will begin lowering borrowing costs in either September or November, having previously fully priced in a first interest rate cut in September before yesterday’s data release. Despite the figures showing higher than expected growth, Andrew Bailey said the UK is still in the midst of a “pronounced period” of disinflation and the UK remained “pretty much on track” compared with the BoE’s February inflation forecast, his comments came during a visit in Washington, where he added that he expected a further sharp drop to price growth in next month’s numbers.
In Oil markets, Brent dropped 3% to $87.37 per barrel, while West Texas Intermediate fell 3.1% to $82.73. These moves were triggered by the Energy Information Administration announcing that commercial crude inventories had risen by 2.7mn barrels to 460mn barrels last week, nearly double the increase analysts had anticipated, thus alleviating fears that supplies could be disrupted by a widening conflict in the Middle East.
US equities continued to sell off yesterday, extending to a 4th consecutive day of declines. The tech sector was the weakest, with the Nasdaq falling 1.1% as five Magnificent Seven stocks traded lower. However, treasuries rallied, ending a three-day sell-off. The yield on the 10-year fell to 4.59%, while the yield on the two-year note fell to 4.93%.
On the data front, overnight we saw the Australia labour market shed 6,600 jobs in March after gaining 117,600 in February. Up next we will have remarks from the ECB’s Guindos and the Bundesbank’s Nagel, this afternoon it's the US Philly Fed and weekly initial claims surveys. Then the Fed’s Bowman and Williams, existing home sales, the US leading index, Bostic, and the ECB’s Centeno, Simkus, and Vujcic, and the BOE’s Megan Greene.
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