- Federal Reserve speakers on Thursday, 25 May 2023 include Barkin and Collins
- US Treasury says the Fitch warning reinforces need for debt limit hike
- Singapore, Korea - concerns over Chinese economic perfomance
- Dai-ichi Life economist says Bank of Japan can remove yield curve control if risks subside
- PBOC sets USD/ CNY reference rate for today at 7.0529 (vs. estimate at 7.0515)
- Bank of Korea leaves its base rate unchanged at 3.5%, as expected
- JP Morgan reiterate their Bank of England forecast, expect +25bp rate hike in June
- Monetary Authority of Singapore says current monetary policy is appropriate
- Singapore Q1 GDP (final) -0.4% q/q (expected -0.6%) and +0.4% y/y (expected +0.2%)
- Uk auto output up nearly 10% y/y last month - easing supply chain woes, higher exports
- Deutsche Bank like long EUR/GBP despite upside UK inflation surprise
- Japan to introduce strict anti-money laundering rules on cryptocurrency transactions
- Fitch ratings place USA on rating watch negative
- Goldman Sachs says its bullish forecast on commodities was wrong. Still expects higher!
- Westpac see potential for an RBNZ cash rate hike in August
- Moody's warns that lawmaker statements during debt talks could prompt US outlook change
- Feds Bostic says best case scenario is Bank won't consider a rate cut until well into 2024
- US House Speaker McCarthy says could get a debt agreement in principle this weekend
- Confirmed - US House members to head home after Thursday
- The South Korean PPI has risen at its slowest y/y rate since January 2021
- House Republicans heading home for the Memorial Day long weekend, but be ready to return
- McCarthy says negotiations will continue this evening
- Forexlive Americas FX news wrap: USD/JPY hits highest since Nov as Waller stays hawkish
- RBNZ Governor Orr says NZ rates are restrictive, well above neutral
- McCarthy on debt limit talks - things are going a little bit better
- Trade ideas thread - Thursday, 25 May 2023
We had warnings on the US debt limit stalemate from both Moody’s and Fitch today. Fitch placed the United States' 'AAA' on rating watch negative:
- “The contested 2020 presidential election, brinkmanship over the debt limit to advance political agendas, and failure to reach consensus on the country's fiscal challenges are recent signs of the deterioration in governance.”
More in the bullet points above from both agencies.
The Fitch announcement sent the yen higher, albeit briefly. Yen crosses dipped across the board but soon recovered with USD/JPY making a high above 139.60 as I post.
Earlier in the session Nvidia announced beats (blowout beats!) in its earnings announcement and provided extremely strong guidance. Its shares rocketed higher in after hours trade. NASDAQ equity index futures (NQ) on Globex found support on the news. The NVDA stock rally has brought the chip maker within sight of a valuation of US$1 trillion.
In regional news, South Korea's central bank held interest rates steady for a third meeting on Thursday, as expected, after a 1-1/2-year-long tightening cycle. Singapore’s economy contracted q/q in the first quarter, raising the risk of a recession.
Across major FX yen was the big mover (yen lower) but we did see declines more broadly. EUR, GBP, AUD, NZD, CAD all down against the dollar.
Data from Japan today showed the 8th consecutive week of net foreign purchases of Japanese stocks. If the BOJ pivot and send the yen higher the foreign buyers will get a nice windfall FX gain.
Asian equity markets:
Japan’s Nikkei 225 +0.5%
China’s Shanghai Composite -0.3%
Hong Kong’s Hang Seng -1.6% to a two-month low
South Korea’s KOSPI -0.3%
Australia’s S&P/ASX 200 -0.8%
On the Bloomberg Terminal from Fitch. If S&P &/or Moody's do something similar the impact on markets will be greater.
