Hi Folks.
Before we get rolling, a quick comment on the CPI/PPI numbers from last week. The Fed uses these numbers (along with the Core PCE) to determine the rate of inflation present in the economy during each period between FOMC meetings. This week, both the CPI and PPI registered negative numbers, which means prices dropped rather than increased during the previous month. This builds on at least last month's PPI, which also registered a negative number for the first time in a while. I think maybe during the Pandemic we posted two or three negative months in a row, which is understandable given the turmoil surrounding that event. But this is boding well for creating the necessary conditions for the Fed to start cutting rates. Of course, as I mentioned previously, the Fed has a long and well documented record of waiting too long to make these adjustments and plunging the economy into a recession, so nothing is guaranteed, and if you are a betting person, betting on the Fed to stand pat on the rate at the May 7 meeting isn't the worst bet on the board. As usual, we will take a wait and see on this one.
And if you doubted that the Index market crashes were a 100% tariff-related temper tantrum, the 3,000 point jump in the Dow over the four hours after President Trump announced a pause on all tariffs except for China should have put your remaining doubts to rest.
Here is this week's forecast.
SUNDAY: A pair of New Zealand numbers (BusinessNZ Services Index at 6:30 p.m. my time and Visitor Arrivals m/m at 6:45 p.m.) which we have glanced at several times now and they have never given us any reason to throw in a trade, so don't expect anything different tonight. Pass.
MONDAY: Asian/London Session: Much like all of last week, there are numerous Yellow Folder numbers dropping from all over, but they are all easily ignored without risking missing out on anything worth trading. And that is the problem with so many of these garbage numbers. They lull you to sleep with month after month of no response to whatever the number might be, then one month, out of the blue, they are the only thing you can find that might justify an unexpected big price move that just took place. You likely didn't get in on the move (hence the "unexpected" part) but for the next 6 months you watch the number with the eyes of an eagle, hoping for price action lightning to strike in the same place twice. And it never happens. But it keeps the number producers (and the FF Calendar guys) occupied for another 6 months. CAD has a Wholesale Sales number at 8:30 but this is one of the few CAD numbers that doesn't have much history of price activity behind it. So proceed with caution, CAD traders. Tonight it's more of the same, although the RBA releases the minutes of their last Rate Decision meeting at 9:30 p.m. Not a number so you can't really trade it, but depending on the contents it might be the source of some sort of minor trend developing. So keep your eyes open late tonight if you trade the AUD.
USA Session: All Fed Speak, all the time. 12:00 p.m. (Barkin); 1:00 p.m. (Waller); 6:00 p.m. (Harker); 7:40 p.m. (Bostic). For reasons I can't quite decipher, Waller at 1:00 p.m. has been labeled Beige Folder by FF, meaning they think this one might carry more weight than the other three which are all Yellow. Okay. But it's still Fed Speak and it still carries a far greater likelihood of doing damage to existing trades than it does in creating a new trade worth taking. Pass on all 4 in my opinion.
TUESDAY: Asian/London Session: At first glance tonight looked impressive simply from the overall number of entries on the calendar. But on further examination, maybe not so much. But we start at 2:00 a.m. with the GBP Claimant Count Change and a couple of related numbers. This one moves the GBPUSD and most of the other GBP pairs, so definitely is one to watch if you aren't dead asleep when it drops (like I am). The rest of the early numbers don't amount to anything until 8:30 when the CAD releases all 967 versions of their CPI number. CAD traders already know that CAD CPI is one of their High Holy Days of trading, so if you haven't taken a look at the CAD charts in a while but are getting curious, today is a great day to take that first look. The rest of the day and evening are numbers that likely won't move price much at all so if you forget they are out there while trading the related currency, you likely won't experience anything one way or the other.
USA Session: 8:30 a.m. gives us Import Prices and the Empire State Manufacturing Index. Again, for reasons I cannot discern, the Empire State number is now labeled Beige Folder. I have been dismissing the Empire State number for a while now simply because these numbers (Empire, Philly Fed, Richmond) fail to have much impact, at least when compared to 10 years ago when they were pretty much all Red Folder and highly anticipated each month. So I went back and looked at 2 number drops: in November of last year and March of this year (last month). Both numbers had low expectations and huge misses (NOV: Exp. -0.3, Act. 31.2; MAR: Exp. -1.9, Act. -20.0). In both months they were paired up with Retail Sales and Import Pricing. In November the GBPUSD saw a 40 point move at 8:30, but Retail Sales missed in both directions. In March while also paired with Retail Sales there was only a 17 pip move on the GBPUSD and Retail Sales Core hit the number on the head while the overall missed to the downside by .4%. Today we get Empire and Imports with no support from Retail Sales so do not expect the market to react in a Beige Folder-worthy manner, even if the actual number misses by 25 points. After 8:30 we get that API Bulletin at 4:30 which does nothing for anyone, and Fed Speak at 7:10 p.m. (Cook).
WEDNESDAY: Asian/London Session: Buckle up, because today we have some serious trading to do in both session. There is a bunch of Yellow Folder nonsense scattered throughout, but I'm going to ignore all that and focus on some well-deserved Red Folder reports. Beginning with GBP CPI at 2:00 a.m. If memory serves the CPI moves the GBP around by 30-40 pips regardless of where the number lands versus expectations. So GBP traders need to be awake for this one. At 9:45 a.m. the CAD announces their new Interest rate, which is expected to remain at 2.75% this time around (after 7 consecutive cuts since April of 2024). Cut or remains the same does not matter. Expect the CAD to react to the decision no matter what it may be (and to the presser that follows at 10:30). At 6:45 p.m. we get the New Zealand CPI q/q, and while none of the non-USA CPI numbers seem to generate the sort of price action we get once a month from the US CPI, this one really fails out badly. The last 2 reports generated 6 and 11 pips respectively, and one of them even missed the target to the downside by .1% (and that was the 6 pip result). Don't risk your money on this one. Finally, at 9:30 p.m. we have the AUD Employment Change number (aka the Aussie NFP). Unfortunately, the only similarity here is the type of activity measured. The last 3 months of Aussie NFP number drops generated a total of 10, 10 and 6 pips worth of movement in the hour after the number dropped. Definitely a let down after an otherwise pretty decent looking day of Red Folder numbers.
USA Session: 8:30 brings the Retail Sales numbers, running a bit late this month (normally they are hot on the heels of the CPI/PPI numbers, which dropped last week around this time). The Old Grey Mare of Red Folder numbers (she ain't what she used to be) so don't expect a lot, but given the number of red folder numbers set for today, it may out perform it's recent history. Some Yellow Folder stuff to ignore, although Oil is at 10:30 for the Oil traders amongst us, then at 1:00 p.m. Powell from the Fed is set to speak at the Economic Club of Chicago about the economic outlook for the USA. This one could really throw some grenades into the charts, depending on what he says and how he says it. In fact, there will likely be an overemphasis placed on his comments by the market, given the Tariff situation PLUS the rapidly plunging Inflation numbers. Everybody will be sniffing out clues (trying to, anyway) and likely misinterpreting his comments as either pro or against a rate cut at the next meeting. So expect your charts to resemble a Shriner's 4th of July Spectacular once 1 p.m. rolls around. Ignore the rest of the Yellow Folder garbage that remains on the calendar for the rest of today.
THURSDAY: Asian/London Session: Typical Yellow Folder mush to start the session, but at 8:15 a.m. the EU is set to cut their own Interest Rates yet again. They started cutting in June of last year from a 4.50% base, paused for one session in July at 4.25%, then it has been nothing but cuts ever since and today is expected to keep that streak alive. Look for at least some activity on the EURUSD as a result, although at this point another cut will likely make less impact on the charts than a surprise pause. But either way you should be able to squeeze something out of this one (and the presser at 8:45 a.m.) That's really all there is worth watching from this session today, morning and evening.
USA Session: 8:30 brings us Philly Fed Manufacturing Index, along with first time Unemployment Claims, Building Permits and Housing starts. Dismissing those building-related numbers, Unemployment has been holding pretty steady for a while now and is expected to remain there today and isn't likely to generate a lot of heat in the markets. Philly Fed is listed Beige Folder, but it has been a very long time since I saw anything move on a chart I could say with any degree of certainty was because of a Philly Fed number. And with today being the last day of trading before the Good Friday holiday I expect foreign participation in the markets to be light as everyone who is anyone makes a 4 day vacation out of the Friday off. So I am not expecting to see anything noteworthy happen this morning. We close out with NatGas at 10:30 and Fed Speak (Barr) at 11:45 a.m.
FRIDAY: Asian/London Session: Closed for Good Friday.
USA Session: Open for Good Friday (way to represent, most Christian Nation on the Planet) with Fed Speak (Daly) at 11:00 a.m. But good luck getting any trades in today. I'm not even sure most brokers will be open. But either way, this is a day you probably should just take off.
See you next week.
Jeff
