Fed speakers talk up rate cuts

Saudi Arabia recorded a trade surplus of USD 8.15bn in February, up 4% y/y and more than 44% m/m. Total oil exports by value dropped in February, down 4% m/m and almost 8% y/y, thanks to oil prices declining on both a monthly and annual basis. Saudi Arabia’s trade surplus has been trending steadily lower in 2024 thanks to lower oil prices and the country is projected to record a current account deficit this year according to both our forecasts and projections from the IMF.

Manufacturing confidence in Turkey dropped in April to 103.2 thanks to declines in output and assessments of the general business situation, according to the country’s central bank. Total orders did improve month/month while export orders were also marginally higher. Attitudes toward investment were roughly stable month/month.

Fed governor Christopher Waller said that he thought it was important for the Fed to “step in” if tariffs lead to firms cutting employment. He said in comments to Bloomberg that the tariffs introduced by the Trump administration earlier this month wouldn’t have a noticeable effect on the economy immediately. Elsewhere Beth Hammack, the president of the Cleveland Federal Reserve Bank, said that if the Fed had “clear and convincing data by June” then it could adjust rates. She also emphasized the cautious nature of the Fed to move too quickly, saying that now was a “good moment for us to take our time.”

Core durable-goods orders stagnated in March in the US with orders ex-defence ex-aircraft up by just 0.1% m/m. The headline rise of 9.2% in new orders ware largely down to non-defence aircraft with nearly all other segments recording declines or very marginal growth. Shipments of core goods were up by just 0.3% m/m in March, slower than the 0.7% recorded a month earlier. Like the inflation and jobs data released earlier this month, the durable goods orders reflects sentiment prior to high tariff rates coming into effect in the US.

Initial jobless claims in the US came in line with expectations for the week ending April 19 at 222k, higher than the 215k recorded a week earlier. Continuing claims declined to 1.84m for the week ending April 12, lower than the 1.89m recorded in the prior week. Existing home sales in the US were lower in March at 4.02m, down from 4.26m in February.

Today’s Economic Data and Events

• 10:00 UK retail sale Mar: forecast 1.8% y/y.
• 18:00 US Univ. of Michigan sentiment Apr f: forecast 50.6

Fixed Income

• US Treasuries rallied overnight on the prospect of rate cuts from the Fed coming in June. Yields on the 2yr UST fell 7bps to 3.7971% along with a similar sized drop in yields on the 10yr UST, closing at 4.3149%. Markets are pricing in about 16bps of cuts by the June FOMC or a little more than 50% probability.
• Regional credit was positive across the board with indexes across all GCC markets higher and up across all sectors. Broader EM bonds rose as well.

FX

• The US dollar dipped against peers overnight with growing expectation of rate cuts weighing against the dollar. EURUSD added 0.7% to settle at 1.1390 while GBPUSD was up by about the same amount at 1.3342. The Japanese yen strengthened against the dollar with USDJPY down by 0.6% at 142.63.
• In commodity currencies USDCAD fell by 0.2% at 1.3853 while AUDUSD added almost 0.8% to 0.6408 and NZDUSD gained nearly 0.9% to settle at 0.5998.

Equities

• Benchmark equity markets rallied overnight on the hope of easing trade tensions. The Dow Jones added 1.2% while the S&P 500 gained 2% and the NASDAQ rallied 2.7%. In Europe, the Euro Stoxx market added 0.3% while the FTSE was flat.
• In local markets the DFM was lower by 0.2% while the ADX gained 1.5%. The Tadawul rallied 0.7%.

Commodities

• Oil prices nudged higher overnight with Brent futures up 0.7% at USD 66.55/b while WTI added 0.8% to close at USD 62.79/b. The US energy secretary, Chris Wright, said that the uncertainty in energy markets sparked by the Trump administrations use of tariffs was a “short term issue” and that the government was “doing everything we can to encourage production.”