Diskusija

USD-JPY extended its reversal lower overnight, and has now unwound all of the surge
seen on Monday. Nonetheless, the JPY remains one of the world’s worst performing
currencies during March, outperforming only the Egyptian pound on a total return basis. The
partial JPY revival in the last couple of days may simply reflect a correction of an over-shoot. It
is also possible that FX intervention concerns played their part as BoJ Governor met PM
Kishida today, a couple of days after Japan’s Finance Minister said “we need to closely monitor
the impact of the yen on the economy with a sense of urgency.” (Bloomberg, 28 March)

Oil markets were in focus after a relatively uneventful post European close yesterday. Asia markets came in to a report from Bloomberg that the Biden administration is weighing a plan to release roughly a million barrels of oil per day from US reserves over a period of several months, citing unidentified individuals. Oil prices plunged, and market moves revolved around this. DXY was slightly bid, while NOK saw the biggest losses in FX. EMFX was bound within a tight range against the greenback. Treasuries and stocks were supported a touch by the headlines as well. Chinese PMI dipped back below 50 for the first time since August, coming in weaker than expectations.

Looking ahead, OPEC+ at 13:00 BST and Biden’s speech at 18:30 BST are the main events for oil markets, with the former unlikely to move markets, while the latter will be closely watched following the Bloomberg report. USD will look forward to Initial jobless and continuing claims, PCE deflator data and some Fedspeak ahead of NFP tomorrow. GBP and CAD see GDP data, CHF and HKD see retail sales data. EUR will be watchful of French CPI and Eurozone unemployment data after yesterday’s hot German CPI print. HUF will eye its one week deposit rate decision where markets expect a 30 bps hike. CZK and COP also see rate decisions in which Citi Economics expect a 50bps and 150bps hike respectively.

Markets have held relatively steady since the European close yesterday. The major moves revolved around a report from Bloomberg that the Biden administration is weighing a plan to release roughly a million barrels of oil per day from US reserves over a period of several months, citing unidentified individuals.

FX saw NOK lead losses at -0.64% due to the oil price slide, while NZD and AUD also saw declines of over 0.3%. The dollar saw a modest increase, with the bulk of the other currencies in a tight range against the greenback.

Stocks are modestly higher as the prospect of lower gas prices can take off pressure from household budgets, after a NY session saw a brief dip that quickly recovered. S&P eminis are up 0.2%, while Nasdaq100 futures are up 0.5%.

Oil: According to the article mentioned earlier, the total release may be as much as 180mn barrels, in comparison to the past two releases of 50mn and 30mn respectively from the SPR. These plans may be accompanied by a global release due to efforts by the IEA, although the article notes a final decision has yet to be made on the global release.

Looking ahead, Biden will also be speaking at the White House at 18:30 BST on his efforts to lower gasoline prices. We also look forward to the OPEC+ meeting today beginning 13:00 BST, where a planned supply increase of 432k bpd is expected to be ratified. We expect headlines soon after, with recent meetings having been short.

USD: Data and speak unlikely to move markets as we wait for NFP
– Initial Jobless & Continuing Claims at 13:30 BST. Very low initial and continuing jobless claims are an encouraging sign for the near-term strength of the labor market that should continue to provide cover for the Fed to turn notably more hawkish over the coming months. Citi Economics expects initial claims to remain low at 190k for the week ending March 26 and for continuing claims to fall modestly further to 1335k for the week of March 19.
– PCE Deflator MoM at 13:30 BST for February. Citi Economics expects core PCE inflation to rise 0.43%MoM and to 5.52%YoY, rounding to 0.4% and 5.5% respectively but with upside risk for a print that rounds to 0.5%MoM and 5.6%YoY. Headline PCE inflation should rise 0.6%MoM and to 6.4%YoY, but also with upside risks of a print that rounds to 0.7%MoM and 6.5%YoY.
– Fed’s Williams Makes Opening Remarks at 14:00 BST. Williams reiterated his newly hawkish stance last week, and we expect him to continue emphasizing risk to the upside in inflation.

GBP: UK Quarterly National Accounts and GDP for Q4 at 07:00 BST. Citi Economics expects limited headline revision in the UK National Accounts. However, the two features of this release that we think will be most interesting are 1) the scale of the reduction in the household savings rate and 2) developments in the current account. Both will remain key questions for the economic cycle ahead, with our economists projecting another deterioration in the current account (-GBP23.4bn vs -GBP24.4bn prior) and a further sharp fall in household savings (6.4%QoQ in Q4 vs 8.3%QoQ prior).

CHF: Retail Sales Real YoY at 07:30 BST for February, with SNB's Maechler T. Moser speaking at a Money Market Event at 17:00 BST. February retail sales may remain firm, with little impact by the current geopolitical conflict, while comments from SNB officials may reiterate the unsurprisingly dovish decision reached in last week’s meeting. We continue to expect the SNB to use FX intervention to address inflationary pressures as opposed to rate hikes.

EUR: Signs of inflation in labor markets following yesterday’s hot German CPI print: – France CPI YoY at 07:45 BST for March P. Citi Economics expects a below-consensus print of 4.3%YoY in March vs 3.6%YoY prior (4.8%YoY consensus expectation). France has been better shielded from commodity price pressures, though the likelihood for prices to push higher still increases the probability that inflation should continue to grow across the Eurozone. We watch Eurozone CPI Thursday. – Eurozone Unemployment Rate at 10:00 BST for February. Citi Economics expects job growth to remain strong in February, pushing the unemployment rate lower to 6.7% from 6.8% prior. A lower print prior to Thursday’s Eurozone CPI print may suggest further labor market tightness that will push inflation further.

CAD: GDP YoY at 13:30 BST for January. Despite some of the most substantial lockdowns of the Omicron wave lasting throughout most of the month in January, Citi Economics expects a solid 0.3%MoM increase in GDP by industry. We also expect strength in various goods producing industries like construction. Note that CFIB Business Barometer is also on the agenda at 13:30 BST for March. Our economists see this survey as the most useful survey measure of activity in Canada, prior to the quarterly Business Outlook Survey released by the BoC in a few weeks.

HUF: One-Week Deposit Rate at 08:00 BST. Citi Economics expects an additional ~120bps of hikes in the one-week deposit rate prior to the next policy rate meeting April 26. This would imply weekly 30bp hikes from the NBH, which so far seem to have stabilized HUF.

HKD: Retail Sales Value YoY at 09:30 BST for February. Citi Economics expects a print of -34.9% YoY vs 4.1% YoY prior. February retail sales are likely to be severely affected by COVID-19 resurgence/restrictions.

CZK: Repurchase Rate at 13:30 BST. Citi Economics expects a hike of 50bps to 5.00%, and a further 25bp hike in May. However, they note that the market pricing and resilient euro area PMIs represent a risk of larger 75bp hike.

COP: Overnight Lending Rate at 19:00 BST. Citi Economics expects Banrep to increase policy rates by 150bps. This would imply an acceleration from the 100bp hike undertaken back in January. Inflation has surprised on the upside twice since then, leading inflation expectations to rise as a result, with inflation expectations for 2023 already sitting on the 4% target band ceiling. In addition, new headwinds for inflation are emerging, which should prompt the Board to take a preemptive approach to adjusting their policy stance.

JPY is back under pressure after a brief interruption heading into month-end. Early selling in Treasuries and catch-up rally in Japan bonds after BoJ’s beefed up quarterly buying plan released on Thursday put yield differentials front and center again. Away from JPY, activity was poor, with our eTrading team seeing flows down around 20% as Friday fatigue and upcoming US payroll print damps risk taking. AUD saw a brief bounce as jump in RBA cash rate fix spurred a knee-jerk selloff across the front-end, which prompted retraced. USDAsia has seen muted price. CNH was unresponsive as markets were well-primed for the soft Caixin PMI print with local media continue to talk central bank easing. KRW rates jumped higher after more balanced comments from nominee Governor spurred fresh paying flows.

US payrolls data ahead, with rates vol markets already elevated in anticipation, though first we also watch Eurozone CPI for EUR, which carries firm upside risks to the Bloomberg consensus following the country level data. There are also a slew of cross-regional S&P PMIs/CPIs. For energy markets, the IEA energy meeting gets underway in the NY morning. Elsewhere, economic data appears for CLP, BRL, and KRW.