SignalPlus Macro Analysis (20240419): The Federal Reserve said it will not cut interest rates this year
The US market got off to a solid start, geopolitical tensions and negative sentiment seem to be disintegrating quickly, Initial Jobless Claims remained extremely stable (around 210k for 5 out of 6 weeks), and the Philadelphia Fed Manufacturing Index climbed to its highest level since April 2022 (driven by New Orders +12.2 and Prices Paid +23).
However, just one day after gaining a foothold, US Treasuries were hit hard again, with New York Fed President Williams suggesting that a rate cut was no longer his "base case," saying that interest rates were in a "good position" and "I don't see any urgency to cut rates." Yields jumped 5-6 basis points across the board, with the 2-year yield once again approaching this year's high of around 5%.
The sharp rise in U.S. Treasury yields and the dollar index prompted U.S. Treasury Secretary Yellen, Japanese Finance Minister Suzuki and South Korean Finance Minister Choi Sang-mok to issue a joint statement, saying that the three countries will "continue to consult closely on foreign exchange market developments, consistent with existing G-20 commitments", while acknowledging that Japan and South Korea are concerned about the recent sharp depreciation of the yen and won, which indicates that if the trend continues, central banks in the region may intervene in foreign exchange. Reuters later reported further news that Japanese Finance Minister Suzuki said that "it is meaningful for the G7 to confirm its commitment to excessive exchange rate fluctuations to prevent negative impacts on the economy", and it seems that trading risks brought by the news will return for a while.
Speaking of news risks, the news of Israel's attack on Iran at the end of the trading day caused all asset classes to fall rapidly (SPX futures <5000, Nikkei futures -3%, BTC fell from 63,500 to below 60,000), and as the war risk premium continues to escalate, risk sentiment may continue to remain depressed as we enter the weekend. BTC ETF inflows were also disappointing again, with IBIT only adding $37 million in inflows and GBTC outflowing $90 million.
We have been talking about reducing risk and protecting profits over the past 1.5 weeks. After all, geopolitical conflicts do not look like they will be resolved soon, and macro data is unlikely to show any dovish relief before the release of PCE data next Friday. In other words, please be cautious when trading in the next few days.
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