Good morning,
Parisians hoping to turn their apartments into gold mines during the Olympics might need to reassess their game plan. With a flood of listings saturating the market, rental prices are taking a nosedive. Despite the anticipated influx of visitors, only a fraction of Airbnb spaces have been snapped up so far. While Airbnb remains optimistic, competition from hotels and a glut of listings mean hosts might need to brace for disappointment. It’s a game of supply and demand, and right now, Parisians might need to lower their expectations along with their prices.
Last Week
Sterling navigated a rollercoaster week, starting with a sharp plunge in Asian trading, hitting lows against the Euro and Dollar. The trigger? Growing speculation of an imminent interest rate cut by the Bank of England, fuelled by Deputy Governor Dave Ramsden’s comments in Washington. However, hopes were dashed as the Chief Economist swiftly countered, insisting that the UK’s monetary policy outlook remained unchanged. This prompted a recovery, bolstered by strong services data, culminating in a positive close to the week. Despite initial selling pressure, Pound Sterling showed resilience, rebounding against major currencies, supported by the Bank of England’s reassurances.
The US economy underwent a week of fluctuations, prompting renewed speculation about Federal Reserve actions. Surprisingly weak PMIs and GDP figures revived discussions of a potential rate cut, countering prior expectations of rate hikes buoyed by strong economic data and hawkish remarks from policymakers. Former President Trump’s critiques of the robust Dollar’s impact on exporters further stirred the pot, contributing to the currency’s decline throughout the week. However, analysts maintain that a significant drop in the Dollar’s value would necessitate more pronounced economic downturns from the world’s largest economy. Despite Joe Biden’s hopes for a pre-election rate cut facing setbacks due to inflation and growth data, uncertainties persist regarding the Fed’s next move.
The Bank of Japan has been a focal point of discussions this year as the yen continues its downward trajectory, reaching 35-year lows. Last week, the BoJ’s April policy statement failed to provide the expected defence of the yen, leading to a further decline in its value. With the currency now down 10.25% since the beginning of the year, intervention seems crucial to stem the slide. Complicating matters, China’s offshore renminbi hit a record high against the yen, amplifying concerns for Japan’s export-driven economy. Despite rising pressure on the BoJ to support the currency, the decision to maintain interest rates near zero reflects a cautious approach, highlighting the ongoing challenges facing Japan’s economic stability amidst global market fluctuations.
This Week
The upcoming week is poised to be eventful for the US dollar, with the focus squarely on the Federal Reserve’s policy decision on Wednesday and the release of the April jobs report. The expectation for the Fed to hold rates steady reflects a shift in market sentiment, driven by stronger-than-anticipated inflation and employment data. Chair Powell’s remarks during the press briefing will be closely monitored for indications of the Fed’s future policy trajectory, particularly regarding potential rate cuts. Additionally, attention will turn to Friday’s nonfarm payrolls report, with analysts eyeing wage growth alongside job creation figures. Amidst these developments, investors will be seeking insights into the Fed’s outlook and the health of the labour market.
The Euro is gearing up for a pivotal week as it braces for updates on first-quarter GDP and April CPI figures. With expectations of a June rate cut firming up, investors are eagerly anticipating these releases to gauge the trajectory of monetary policy. While a June cut appears imminent, uncertainties loom over subsequent rate movements, especially with market pricing suggesting a tempered outlook. Germany’s Bundesbank head, Joachim Nagel, has cautioned against assuming a cascade of rate reductions following a June cut. Tuesday’s data releases are poised to influence market sentiment, although significant deviations from forecasts may be necessary to sway June rate expectations. A brighter economic outlook, reflected in first-quarter GDP growth projections, could ease pressure for aggressive rate cuts, contingent upon sustained inflation levels. Amidst these deliberations, the Euro’s performance against the dollar hangs in the balance, hinging on the data’s directional impact.
Key Events
Monday April 29th
ALL DAY German CPI
Tuesday April 30th
02:30 Chinese Manufacturing PMI
13:30 Canadian GDP, US Employment Cost Index
15:30 US Consumer Confidence
23:45 New Zealand Unemployment Rate
Wednesday May 1st
13:15 US Non-Farm Employment
15:00 US Manufacturing PMI’s
19:00 US Fed Rate Statement
21:15 BOC Gov Macklem Speaks
Thursday May 2nd
07:30 Swiss CPI
13:30 US unemployment Claims
13:45 BOC Gov Macklem Speaks
Friday May 3rd
13:30 US Unemployment Rate & Average Hourly Earnings
15:00 US Services PMI
Have a great week,
The Garton Team