Rise and shine everyone!

It’s Fed Day! While we’re not anticipating a change in rates, we are going to be watching closely at any changes made to the Summary of Economic Projections (SEP) that will be released today. With inflation readings in the last two months coming in hotter than expected, we want to watch out for changes to inflation projections, particularly core and then, whether that actually changes the number of rate cuts.

Mayhem reminds us that the market is not particularly well-hedged here and a hawkish rhetoric may actually see the market go lower. Read his excellent Fed preview here:

The US Dollar Index continues to climb higher, up over 1% in the past week and a hawkish view from the Fed could just propel it higher. The weakness in the JPY is certainly not helping either. However, watch out for intervention (official or otherwise) as the USD/JPY closes in on that $152 level. In case you missed it, we discussed the Bank of Japan’s meeting here:

We’re seeing some of the speculative behavior settle down in markets and a resetting of some of that excess as the market trades in a range. The parabolic rise in some of these stocks and Bitcoin warrants some profit-taking, as we can see in NVDA.

Gold is consolidating for now and again, Fed days are not the best to trade gold, one way or the other. The moves tend to be very volatile.

But, given the current state of the market, a dip could just be what the market is waiting for, since we do have that backdrop of relatively strong GDP growth, fiscal impulse and higher anticipated corporate earnings.

US Equity Futures are largely flat following on from yesterday’s bullish close. The SPX made yet another all-time high. Rates have pulled back, more on the longer end. Oil is pulling back in pre-market trading but overall continues to be in a bullish trend and above $82/bbl.

Today, we also have Brazil’s rate decision. Tomorrow we have the Bank of England, Turkish Central Bank and Swiss National Bank meetings. Finally, we also get a whole host of Flash PMIs from the UK, the Euro Area and the US tomorrow.

Stories

• Intel trades higher in the pre-market after a $8.5B award from the US Government’s CHIPS act.

• UK CPI came in at the lowest annual pace since Sep 2021. PPI came in negative. This could lead to a dovish tilt for the BoE meeting tomorrow.

• China PBOC kept Loan Prime Rates unchanged today for 1- and 5-year settings, as expected.

• Indonesia’s Central Bank kept rates steady at 6%, as expected. This is the 5th straight pause in the tightening cycle and they see room for policy moves only in H2.

• Taiwan reported Feb export orders. The one standout was export orders from China increasing +28% YoY compared to -3.5% prior.

• Chipotle’s Board approves a 50-to-1 stock split effective June 26th. This is the first split in the company’s 30-year history.

• Reportedly ECB discussion on rate cuts is now more about frequency than about magnitude; ECB does not need to ease quickly but also doesn't need to wait for the Fed to cut first.

Charts of the Day

According to BofA, most still expect 3 rate cuts to be projected in today’s SEP.

And BofA’s Global Fund Manager Survey shows sentiment is most bullish since 2022.

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)