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Dollar-Bloc Currencies Reverse Lower, while Sterling Tests Support below $1.30

The US dollar rose against all the major currencies last week and the Dollar Index rose to it sits highest level since May 2020.  The relative strength…

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The US dollar rose against all the major currencies last week and the Dollar Index rose to it sits highest level since May 2020.  The relative strength of the US economy and the aggressive course the Fed appears to be signaling appears to be the main driver.  The US 10-year yield rose more than 30 bp last week to 2.70%.  Of the G7 bond markets, only Italy's yield rose more (32 bp).  

The US 2-10-year yield curve steepened by 26 and is now positively sloped by around 19 bp.  The steepening, which appeared linked to the quicker pace that the Fed's balance sheet will shrink beginning as early as next month snapped a six-week flattening trend that had briefly inverted the curve. 

What stands out is the reversal of the dollar blocs fortunes.  A less dovish Reserve Bank of Australia lifted the Australian dollar to its best level since June 2021 (~$0.7660), but it proceeded to sell-off and closed below the previous week's low.  The New Zealand dollar set a new four-month high near 0.7035 but also reversed lower, which was also below the previous week's lows.  The market is pricing in about a 66% chance that the RBNZ hikes by 50 bp next week.  The greenback bounced smartly off CAD1.24, its lowest level since last November and reversed higher.  Even with a strong jobs report and aggressive tightening priced into the swaps market (the 65 bp discounted, show is consistent with a little more than a 50% chance of a 75 bp hike by the Bank of Canada when it meets next week), the US dollar rose to almost CAD1.2620 ahead of the weekend, its best level in 2 1/2 weeks.  

The euro could not get out of its own way.  After posting a key downside reversal on March 31, it has not been able to sustain even the most modest of upticks.  It takes a seven-day slide into next week and looks poised to re-challenge the $1.08 low seen last month.  Sterling took out the $1.30 low seen in mid-March to trade at its lowest level since November 2020.   Rising US yields have kept the yen on the defensive.  It has fallen for six consecutive sessions and looks set to rechallenge the JPY125 area.  

Dollar Index:  The Dollar Index has risen for seven consecutive sessions through the end of last week.  It moved above 100.00 for the first time since May 2020.  The momentum indicators are trending higher. There is near-term potential into the 100.50 area and then the high from April 2020 around 100.85.  The high reached during the panic in March 2020 was almost 103.00.  A word of caution comes from the Bollinger Band.  The Dollar Index has been flirting with the upper band most of the week and settled above it (~99.97). Initial support is seen near 99.60.  

Euro: Sentiment toward the euro is poor.  Ahead of the weekend, the Bank of Italy warned that its economy may have contracted in Q1.  That follows the Bundesbank and the German wisemen (economic think tanks that advise the government) cuts to their growth forecasts.  The euro is set to test the March low slightly above $1.08 next week.  There is little meaningful support below there until the March 2020 low around $1.0635.   The momentum indicators are headed lower, though the Slow Stochastic is getting stretched.  The lower Bollinger Band, slightly below $1.0845 is getting frayed.  A move above the five-day average (~$1.09) might be an early sign that this leg down is over.  The tightening of the French presidential contest may have weighed on the euro.  A strong showing by Le Pen or weaker than expected support for Macron would likely spur euro sales initially.  

Japanese Yen: The 60-day correlation of the change in the exchange rate and the change in the 10-year US yield is rising and is now a little 0.50. Over the same period, the correlation with the S&P 500 is less than 0.1.  The dollar has risen for six consecutive sessions, rising to almost JPY124.70 ahead of the weekend.  Not coincidentally, the US 10-year yield has also risen for the last six sessions.  We have suggested the JPY125.00-JPY125.50 may be the upper end of a new range for the greenback.  Recall that the high from 2015 was closer to JPY125.85.   Before that, the last significant high was in 2002 a little above JPY135.00.  The MACD is terribly stretched, but the Slow Stochastic is turning back up after pulling back since late March.  The higher volatility environment means that the upper Bollinger Band (two standard deviations above the 20-day moving average) will begin the new week close to JPY125.60.  

British Pound:  The broad US dollar gains proved too much for sterling, which fell below $1.30 for the first in nearly a year and a half.  The Bank of England is not seen likely to keep up with the tightening envisioned for the US or Canada.  The market sees little likelihood that the BOE hikes rates by 50 bp at all this year, while the market is debating whether the Fed will hike by 50 bp two or three times this year, for example. Russia's invasion of Ukraine has kept UK politics out of focus, but next month's local elections may change that.  We have been anticipating a break of the $1.30 area to signal a push toward $1.2830, the halfway mark of the rally from the pandemic-panic low near $1.14 to last year's high around $1.4250.  The momentum indicators are headed lower and the Slow Stochastic is a little above oversold territory.  The lower Bollinger Band will begin the new week by $1.2990.  It may take a move above $1.3075-$1.3100 to stabilize the tone.  

Canadian Dollar:  The US dollar fell to a five-month low on April 5 to almost CAD1.24.  It reversed higher that day, leaving a bullish hammer candlestick in its wake.  It has not looked back and made a high after the strong jobs report to nearly CAD1.2620.  The momentum indicators have turned up and give scope for further greenback gains.  Even though the Bank of Canada meets on April 13, it still looks vulnerable.  The swaps market has nearly 65 bp of tightening priced in for the meeting.  The way to understand that is that the market is divided between a 50 bp and a 75 bp hike.  That seems a bit rich, given that a week ago the swaps market did even have a 50 bp hike full discounted.  The US dollar approached the (50%) retracement of the decline since the March 15 high near CAD1.2870 found near CAD1.2635.  The 200-day moving average is found slightly lower, around CAD1.2620.  Above these levels, the next important chart point is closer to CAD1.2690, the (61.8%) retracement target.  The market may be cautious about taking the greenback higher immediately. A pullback toward CAD1.2500-CAD1.2520 would not be surprising. In the bigger picture, the US dollar recorded an outside up week against the Canadian dollar by trading on both sides of the previous week's range and settling above it high.  It looks like a broad range between CAD1.24-CAD1.29 has been forged.  

Australian Dollar:  After rising to its best level since last June (~$0.7660) on the back of a slightly less dovish central bank, the Australian dollar was sold down to almost $0.7425 ahead of the weekend.  The conservative assumption is that it is retracing the last leg up that began in mid-March near $0.7165 rather than the year's low set last January closer to $0.6970.  The (50%) retracement objective is a little below $0.7415.  The next retracement target (61.8%) is near $0.7355.  The momentum indicators have turned lower but remain at elevated levels.   A strong March jobs data on April 14 may spur rate hike talk, but a 25 bp hike is fully discounted for the June 7 meeting and around 190 bp of tightening is seen this year.  This seems aggressive and seems to imply a 50 bp hike along the way.  

Mexican Peso:  The US dollar extended its losses against the Mexican peso at the start of last week.  It fell to MXN19.7275, its lowest level since June 2021.  It bounced strongly over the next two sessions for the first time in a month.  The squeeze higher ran into sellers near MXN20.1950.  Subsequently, it consolidated in a range that extended to around MXN20.07.  The downside can be extended toward MXN20.00 with challenging what we suspect to be a more sustained recovery for the greenback.  The momentum indicators have turned higher from oversold territory.  Our initial target is in the MXN20.35-MXN20.40 area.  Mexico reported stronger than expected March CPI (7.45% vs. 7.28% in February).  The central bank does not until after the Fed next month.  A 50 bp is widely expected to 7.0% is widely expected.   However, Banxico is ahead of the US in the cycle, and it is not clear that it can keep up with the Fed as the year progresses.  

Chinese Yuan: For the fourth consecutive week, the dollar settled little changed between about CNY6.3610 and CNY6.3660.  Macro considerations arguable favor a stronger dollar.  China's 10-year premium over the US was over 100 bp as recently as early March.  At the end of last week, it slipped below five basis points.  The narrowing spread may have been behind the record divestment of Chinese bonds in March (~CNY52 bln, ~$8 bln), according to Bloomberg estimates based on Chinabond and PBOC data. It was the second consecutive month that foreign investors were sellers for a cumulate liquidation of CNY87 bln.  The weakening of the Chinese economy as officials respond to the rising Covid cases, is very disruptive.  More policy stimulus is necessary, but there is a significant risk that the Covid outbreaks will increase.   Not only are portfolio flows less supportive and the policy divergence, and the trade surplus is likely to have fallen dramatically in March.  Officials seem content for the time being with the dollar in range between roughly CN6.34 and CNY6.38.  We like the dollar higher, and suspect if it were to appreciate now, it would not be seen as manipulative move.  The dollar may have scope to move into the CNY6.40-CNY6.44 area in the coming weeks.



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United Airlines adds new flights to faraway destinations

The airline said that it has been working hard to "find hidden gem destinations."

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March 8, 2024

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Since countries started opening up after the pandemic in 2021 and 2022, airlines have been seeing demand soar not just for major global cities and popular routes but also for farther-away destinations.

Numerous reports, including a recent TripAdvisor survey of trending destinations, showed that there has been a rise in U.S. traveler interest in Asian countries such as Japan, South Korea and Vietnam as well as growing tourism traction in off-the-beaten-path European countries such as Slovenia, Estonia and Montenegro.

Related: 'No more flying for you': Travel agency sounds alarm over risk of 'carbon passports'

As a result, airlines have been looking at their networks to include more faraway destinations as well as smaller cities that are growing increasingly popular with tourists and may not be served by their competitors.

The Philippines has been popular among tourists in recent years.

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United brings back more routes, says it is committed to 'finding hidden gems'

This week, United Airlines  (UAL)  announced that it will be launching a new route from Newark Liberty International Airport (EWR) to Morocco's Marrakesh. While it is only the country's fourth-largest city, Marrakesh is a particularly popular place for tourists to seek out the sights and experiences that many associate with the country — colorful souks, gardens with ornate architecture and mosques from the Moorish period.

More Travel:

"We have consistently been ahead of the curve in finding hidden gem destinations for our customers to explore and remain committed to providing the most unique slate of travel options for their adventures abroad," United's SVP of Global Network Planning Patrick Quayle, said in a press statement.

The new route will launch on Oct. 24 and take place three times a week on a Boeing 767-300ER  (BA)  plane that is equipped with 46 Polaris business class and 22 Premium Plus seats. The plane choice was a way to reach a luxury customer customer looking to start their holiday in Marrakesh in the plane.

Along with the new Morocco route, United is also launching a flight between Houston (IAH) and Colombia's Medellín on Oct. 27 as well as a route between Tokyo and Cebu in the Philippines on July 31 — the latter is known as a "fifth freedom" flight in which the airline flies to the larger hub from the mainland U.S. and then goes on to smaller Asian city popular with tourists after some travelers get off (and others get on) in Tokyo.

United's network expansion includes new 'fifth freedom' flight

In the fall of 2023, United became the first U.S. airline to fly to the Philippines with a new Manila-San Francisco flight. It has expanded its service to Asia from different U.S. cities earlier last year. Cebu has been on its radar amid growing tourist interest in the region known for marine parks, rainforests and Spanish-style architecture.

With the summer coming up, United also announced that it plans to run its current flights to Hong Kong, Seoul, and Portugal's Porto more frequently at different points of the week and reach four weekly flights between Los Angeles and Shanghai by August 29.

"This is your normal, exciting network planning team back in action," Quayle told travel website The Points Guy of the airline's plans for the new routes.

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Walmart launches clever answer to Target’s new membership program

The retail superstore is adding a new feature to its Walmart+ plan — and customers will be happy.

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March 8, 2024

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It's just been a few days since Target  (TGT)  launched its new Target Circle 360 paid membership plan. 

The plan offers free and fast shipping on many products to customers, initially for $49 a year and then $99 after the initial promotional signup period. It promises to be a success, since many Target customers are loyal to the brand and will go out of their way to shop at one instead of at its two larger peers, Walmart and Amazon.

Related: Walmart makes a major price cut that will delight customers

And stop us if this sounds familiar: Target will rely on its more than 2,000 stores to act as fulfillment hubs. 

This model is a proven winner; Walmart also uses its more than 4,600 stores as fulfillment and shipping locations to get orders to customers as soon as possible.

Sometimes, this means shipping goods from the nearest warehouse. But if a desired product is in-store and closer to a customer, it reduces miles on the road and delivery time. It's a kind of logistical magic that makes any efficiency lover's (or retail nerd's) heart go pitter patter. 

Walmart rolls out answer to Target's new membership tier

Walmart has certainly had more time than Target to develop and work out the kinks in Walmart+. It first launched the paid membership in 2020 during the height of the pandemic, when many shoppers sheltered at home but still required many staples they might ordinarily pick up at a Walmart, like cleaning supplies, personal-care products, pantry goods and, of course, toilet paper. 

It also undercut Amazon  (AMZN)  Prime, which costs customers $139 a year for free and fast shipping (plus several other benefits including access to its streaming service, Amazon Prime Video). 

Walmart+ costs $98 a year, which also gets you free and speedy delivery, plus access to a Paramount+ streaming subscription, fuel savings, and more. 

An employee at a Merida, Mexico, Walmart. (Photo by Jeffrey Greenberg/Universal Images Group via Getty Images)

Jeff Greenberg/Getty Images

If that's not enough to tempt you, however, Walmart+ just added a new benefit to its membership program, ostensibly to compete directly with something Target now has: ultrafast delivery. 

Target Circle 360 particularly attracts customers with free same-day delivery for select orders over $35 and as little as one-hour delivery on select items. Target executes this through its Shipt subsidiary.

We've seen this lightning-fast delivery speed only in snippets from Amazon, the king of delivery efficiency. Who better to take on Target, though, than Walmart, which is using a similar store-as-fulfillment-center model? 

"Walmart is stepping up to save our customers even more time with our latest delivery offering: Express On-Demand Early Morning Delivery," Walmart said in a statement, just a day after Target Circle 360 launched. "Starting at 6 a.m., earlier than ever before, customers can enjoy the convenience of On-Demand delivery."

Walmart  (WMT)  clearly sees consumers' desire for near-instant delivery, which obviously saves time and trips to the store. Rather than waiting a day for your order to show up, it might be on your doorstep when you wake up. 

Consumers also tend to spend more money when they shop online, and they remain stickier as paying annual members. So, to a growing number of retail giants, almost instant gratification like this seems like something worth striving for.

Related: Veteran fund manager picks favorite stocks for 2024

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President Biden Delivers The “Darkest, Most Un-American Speech Given By A President”

President Biden Delivers The "Darkest, Most Un-American Speech Given By A President"

Having successfully raged, ranted, lied, and yelled through…

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March 8, 2024

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President Biden Delivers The "Darkest, Most Un-American Speech Given By A President"

Having successfully raged, ranted, lied, and yelled through the State of The Union, President Biden can go back to his crypt now.

Whatever 'they' gave Biden, every American man, woman, and the other should be allowed to take it - though it seems the cocktail brings out 'dark Brandon'?

Tl;dw: Biden's Speech tonight ...

  • Fund Ukraine.

  • Trump is threat to democracy and America itself.

  • Abortion is good.

  • American Economy is stronger than ever.

  • Inflation wasn't Biden's fault.

  • Illegals are Americans too.

  • Republicans are responsible for the border crisis.

  • Trump is bad.

  • Biden stands with trans-children.

  • J6 was the worst insurrection since the Civil War.

(h/t @TCDMS99)

Tucker Carlson's response sums it all up perfectly:

"that was possibly the darkest, most un-American speech given by an American president. It wasn't a speech, it was a rant..."

Carlson continued: "The true measure of a nation's greatness lies within its capacity to control borders, yet Bid refuses to do it."

"In a fair election, Joe Biden cannot win"

And concluded:

“There was not a meaningful word for the entire duration about the things that actually matter to people who live here.”

Victor Davis Hanson added some excellent color, but this was probably the best line on Biden:

"he doesn't care... he lives in an alternative reality."

*  *  *

Watch SOTU Live here...

*   *   *

Mises' Connor O'Keeffe, warns: "Be on the Lookout for These Lies in Biden's State of the Union Address." 

On Thursday evening, President Joe Biden is set to give his third State of the Union address. The political press has been buzzing with speculation over what the president will say. That speculation, however, is focused more on how Biden will perform, and which issues he will prioritize. Much of the speech is expected to be familiar.

The story Biden will tell about what he has done as president and where the country finds itself as a result will be the same dishonest story he's been telling since at least the summer.

He'll cite government statistics to say the economy is growing, unemployment is low, and inflation is down.

Something that has been frustrating Biden, his team, and his allies in the media is that the American people do not feel as economically well off as the official data says they are. Despite what the White House and establishment-friendly journalists say, the problem lies with the data, not the American people's ability to perceive their own well-being.

As I wrote back in January, the reason for the discrepancy is the lack of distinction made between private economic activity and government spending in the most frequently cited economic indicators. There is an important difference between the two:

  • Government, unlike any other entity in the economy, can simply take money and resources from others to spend on things and hire people. Whether or not the spending brings people value is irrelevant

  • It's the private sector that's responsible for producing goods and services that actually meet people's needs and wants. So, the private components of the economy have the most significant effect on people's economic well-being.

Recently, government spending and hiring has accounted for a larger than normal share of both economic activity and employment. This means the government is propping up these traditional measures, making the economy appear better than it actually is. Also, many of the jobs Biden and his allies take credit for creating will quickly go away once it becomes clear that consumers don't actually want whatever the government encouraged these companies to produce.

On top of all that, the administration is dealing with the consequences of their chosen inflation rhetoric.

Since its peak in the summer of 2022, the president's team has talked about inflation "coming back down," which can easily give the impression that it's prices that will eventually come back down.

But that's not what that phrase means. It would be more honest to say that price increases are slowing down.

Americans are finally waking up to the fact that the cost of living will not return to prepandemic levels, and they're not happy about it.

The president has made some clumsy attempts at damage control, such as a Super Bowl Sunday video attacking food companies for "shrinkflation"—selling smaller portions at the same price instead of simply raising prices.

In his speech Thursday, Biden is expected to play up his desire to crack down on the "corporate greed" he's blaming for high prices.

In the name of "bringing down costs for Americans," the administration wants to implement targeted price ceilings - something anyone who has taken even a single economics class could tell you does more harm than good. Biden would never place the blame for the dramatic price increases we've experienced during his term where it actually belongs—on all the government spending that he and President Donald Trump oversaw during the pandemic, funded by the creation of $6 trillion out of thin air - because that kind of spending is precisely what he hopes to kick back up in a second term.

If reelected, the president wants to "revive" parts of his so-called Build Back Better agenda, which he tried and failed to pass in his first year. That would bring a significant expansion of domestic spending. And Biden remains committed to the idea that Americans must be forced to continue funding the war in Ukraine. That's another topic Biden is expected to highlight in the State of the Union, likely accompanied by the lie that Ukraine spending is good for the American economy. It isn't.

It's not possible to predict all the ways President Biden will exaggerate, mislead, and outright lie in his speech on Thursday. But we can be sure of two things. The "state of the Union" is not as strong as Biden will say it is. And his policy ambitions risk making it much worse.

*  *  *

The American people will be tuning in on their smartphones, laptops, and televisions on Thursday evening to see if 'sloppy joe' 81-year-old President Joe Biden can coherently put together more than two sentences (even with a teleprompter) as he gives his third State of the Union in front of a divided Congress. 

President Biden will speak on various topics to convince voters why he shouldn't be sent to a retirement home.

According to CNN sources, here are some of the topics Biden will discuss tonight:

  • Economic issues: Biden and his team have been drafting a speech heavy on economic populism, aides said, with calls for higher taxes on corporations and the wealthy – an attempt to draw a sharp contrast with Republicans and their likely presidential nominee, Donald Trump.

  • Health care expenses: Biden will also push for lowering health care costs and discuss his efforts to go after drug manufacturers to lower the cost of prescription medications — all issues his advisers believe can help buoy what have been sagging economic approval ratings.

  • Israel's war with Hamas: Also looming large over Biden's primetime address is the ongoing Israel-Hamas war, which has consumed much of the president's time and attention over the past few months. The president's top national security advisers have been working around the clock to try to finalize a ceasefire-hostages release deal by Ramadan, the Muslim holy month that begins next week.

  • An argument for reelection: Aides view Thursday's speech as a critical opportunity for the president to tout his accomplishments in office and lay out his plans for another four years in the nation's top job. Even though viewership has declined over the years, the yearly speech reliably draws tens of millions of households.

Sources provided more color on Biden's SOTU address: 

The speech is expected to be heavy on economic populism. The president will talk about raising taxes on corporations and the wealthy. He'll highlight efforts to cut costs for the American people, including pushing Congress to help make prescription drugs more affordable.

Biden will talk about the need to preserve democracy and freedom, a cornerstone of his re-election bid. That includes protecting and bolstering reproductive rights, an issue Democrats believe will energize voters in November. Biden is also expected to promote his unity agenda, a key feature of each of his addresses to Congress while in office.

Biden is also expected to give remarks on border security while the invasion of illegals has become one of the most heated topics among American voters. A majority of voters are frustrated with radical progressives in the White House facilitating the illegal migrant invasion. 

It is probable that the president will attribute the failure of the Senate border bill to the Republicans, a claim many voters view as unfounded. This is because the White House has the option to issue an executive order to restore border security, yet opts not to do so

Maybe this is why? 

While Biden addresses the nation, the Biden administration will be armed with a social media team to pump propaganda to at least 100 million Americans. 

"The White House hosted about 70 creators, digital publishers, and influencers across three separate events" on Wednesday and Thursday, a White House official told CNN. 

Not a very capable social media team... 

The administration's move to ramp up social media operations comes as users on X are mostly free from government censorship with Elon Musk at the helm. This infuriates Democrats, who can no longer censor their political enemies on X. 

Meanwhile, Democratic lawmakers tell Axios that the president's SOTU performance will be critical as he tries to dispel voter concerns about his elderly age. The address reached as many as 27 million people in 2023. 

"We are all nervous," said one House Democrat, citing concerns about the president's "ability to speak without blowing things."

The SOTU address comes as Biden's polling data is in the dumps. 

BetOnline has created several money-making opportunities for gamblers tonight, such as betting on what word Biden mentions the most. 

As well as...

We will update you when Tucker Carlson's live feed of SOTU is published. 

Tyler Durden Fri, 03/08/2024 - 07:44

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