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The Greenback has Struggled even as Rate Expectations Rise

The effectiveness of the Federal Reserve’s communication seems clear. The market has nearly 90 bp of tightening discounted here in Q2. This means that…



The effectiveness of the Federal Reserve's communication seems clear. The market has nearly 90 bp of tightening discounted here in Q2. This means that after a 25 bp hike to initiate the tightening cycle, the labor market's strength will allow the central bank to accelerate the pace. By the end of the week, the market will also have a better idea of the timing and pace of the balance sheet unwind.  

The March nonfarm payroll growth may have missed median estimates, but when coupled with the 95k upward revisions, including 72k in February, and other details (from the household survey), the report must be considered strong. The household survey found that 736k people found jobs, and the unemployment rate fell to 3.6% (from 3.8%), even though the participation rate ticked up to 62.4% (from 62.3%). In addition, average hourly earnings rose by 0.4%, and February was revised from flat to 0.1%. The one negative was that the average workweek slipped to 34.6 hours from 34.7. With around 131.1 mln workers, six minutes less work is tantamount to the loss of output of 378.9k full-time equivalents.  

Meanwhile, the March manufacturing PMI was revised higher to 58.8 from 58.5. It is a six-month high and contrasts with the preliminary estimates of the EMU and UK downward revisions. On the other hand, the manufacturing ISM unexpectedly softened to 57.1 from 58.6. It is the lowest since September 2020. Production (54.5 from 58.5) and new orders fell (53.8 from 61.7) while prices paid rose sharply (87.1 from 75.6). 

Investors also learned that February construction spending rose half as much as the median forecasts projected (0.5%, not 1.0%). It was partly blunted by the January revision to 1.6% from 1.3%. March auto sales disappointed too. They slowed to a 13.33 mln vehicle pace from 14.07 mln. The March sales were about a quarter less than March 2021. The 12-month moving average stands at 14.3 mln and matches last year's low, slightly below the 2020 average. Although the shortage of chips is widely blamed as the chief culprit, note that Canada's vehicle sales were off a little less than 20% year-over-year in March. Japan's were off 14.8%.  

The unexpectedly strong eurozone March CPI (7.5%  vs. 5.9% in February) reinforces speculation that the ECB will hike rates this year. The swaps market has almost a 15 bp increase discounted by the end of July. On the eve of Russia's invasion of Ukraine, the German two-year note yield was -0.36%. It settled last week at about -0.07%. It briefly traded positive for the first time since August 2014.   

Although many claim to know what Putin is thinking or his intentions, we do not. Yet, assuming a rational actor still allows for reasonable analysis. We had expected Russia to have limited war aims to secure the entire regions claimed by the separatists. Until these are secured, negotiations seem to be a way to buy time.   The war is also altering fiscal policy in the EMU. Defense spending and new energy infrastructure expenditures will replace part of the public health spending.  

In Japan, the BOJ mounted a rigorous defense of its Yield-Curve Control. This signaled a continuation of its monetary thrust and the fact that it is determined to lag behind the other major central banks. However, the Ministry of Finance seems less convinced by BOJ Governor Kuroda that the yen's weakness still benefits the Japanese economy. Higher energy and food prices are exacerbated by the yen's decline and are squeezing households. The government has begun putting together a package of measures that will ease the pressure. Prime Minister Kishida announced a one-month extension of subsidies to oil wholesalers to lower the price of retail gasoline until the end of April.  

Where does that leave the dollar? 

Dollar Index:  For the past four weeks, the Dollar Index has been in a roughly 97.70-99.40 range. The jump in US rates and wider interest-rate differentials have not (yet) reignited the rally. It peaked on March 7. In the second half of last week, it tested the lower end of the range and reached 98.75 after the jobs report.   The rule of alternation suggests a test on the upper end of the range. SINCE MID-MARCH, the MACD has been trending lower but appears poised to turn higher. The Slow Stochastic has been trending down a bit longer, and it finished last week at its lowest level since the war began.  

Euro: The euro reached a four-week high on the last trading day in March (~$1.185) before posting a key reversal by settling below the previous day's low. Follow-through selling ahead of the weekend pushed it slightly below $1.1030. The $1.0995 is the (50%) retracement of recovery from the $1.08-low on March 7. It is also where the March trendline is found. The next retracement (61.8%) is near $1.0950.  The MACD looks set to turn lower, while the Slow Stochastic is still gently rising. In the bigger picture, last month's price action looks corrective in nature, and that would imply scope for a new low below $1.08.  

Japanese Yen: The greenback peaked on March 28 near JPY125.10. It retreated and found support ahead of the (38.2%) retracement objective of the rally March rally seen by JPY121.10. We often find the dollar-yen exchange rate to be a range-bound pair, and when it looks like it is trending, it is transitioning to a new range. The upper end of the range may extend a little above JPY125.00. The 2015 peak (the high since 2002) was closer to JPY125.85. The lower end of the range may be in the JPY119.50-JPY120.00 area. The MACD is at its highest level since 2016 and has begun flatlining. The Slow Stochastic turned down last week. The correlation between the change in the exchange rate and the difference in the US 10-year yield has softened to about 0.46 over the past 30 days. It peaked at over 0.70 in mid-March. The correlation between the changes in the exchange rate and the S&P 500 (as a proxy for risk) is below 0.15. The Q1 peak was set in early January, slightly above 0.60.  

British Pound:  Sterling has fallen in four of the past six weeks. Year to date, it is off about 3.1% and is the weakest currency of a major central bank that has begun lifting rates. The Swedish krona (~-3.35%) and the Japanese yen (~-6.1%) have fallen more than sterling. It traded in roughly a $1.3085-$1.3185 range in the middle of last week and remained in that range in the following two sessions. The MACD has trended higher since mid-March after sterling tested $1.30. It has begun flattening. The Slow Stochastic has already turned lower. The odds of a 50 bp rate hike at the next BOE meeting (May 5) have fallen to around 20% since the officials tempered their rhetoric in light of the greater uncertainty. The swaps market has about 140 bp of tightening discounted this year compared with a little more than 216 bp by the Fed. AS recently as early February, the UK and US two-year rates were almost identical. Now the US offers a premium of practically 110 bp. This is the most since the early days of the pandemic. A break of $1.30 could spur a move toward $1.2830, the (38.2%) retracement of the sterling's recovery from the March 2020 low near $1.1400.  

Canadian Dollar: The US dollar's high for the year was recorded on March 8 at CAD1.29, and the low for the year was set on March 30 by CAD1.2430. It finished the month around CAD1.2505, which was below the February low (~CAD1.2635). This constitutes an outside down month, a bearish technical pattern. However, the near-term outlook seems more constructive for the greenback. The MACD is set to turn higher, and the Slow Stochastic already has turned up. A small bottoming pattern appears to have been forged last week, which projects toward CAD1.2630. The 200-day moving average is nearly CAD1.2620. For the first time since May 2021, the correlation between the changes in the exchange rate and the changes in oil prices turned positive last month. The correlation is typically inverse. On the other hand, the correlation between changes in the S&P 500 and the changes in the exchange rate remain deeply inverse (-0.63), suggesting risk appetites are a more important driver than crude oil.  

Australian Dollar:  The Australian dollar slipped 0.25% last week, its first weekly loss in three. It was only the second weekly loss since the end of January. Its 3.2% gain year-to-date puts it at the top of the G10 currencies. The New Zealand dollar is in second place with an increase of a little less than half of the Aussie's. The Canadian dollar and Norwegian krone are next (~0.9% and 0.8%, respectively). For the past week and a half, the Australian dollar has been consolidating in a range between roughly $0.7460 and $0.7540. The MACD and Slow Stochastic remain overextended. Although they have stopped rising, they have not convincingly turned lower either. The central bank meets on April 6 in Sydney, and the failure to deliver a hawkish hold could see the Aussie breakdown. The $0.7400 area may be an initial target. It corresponds to the (38.2%) retracement objective since the March 15 low (~$0.7165) and the 20-day moving average.  

Mexican Peso:  The peso is having a historic run. It has rallied for 15 of the past 16 sessions. During this run, the dollar has fallen by 5.2%. Ahead of the weekend, the dollar traded below MXN19.80 for the first time since last July. However, the move is getting stretched, and new downticks are difficult to sustain. The MACD is still falling, but the Slow Stochastic has flatlined and has not confirmed the new lows. Initial resistance is seen in the MXN19.97-MXN20.02 band. Mexico reports March CPI on April 7. It is expected to have edged higher to 7.35% (median from Bloomberg's survey) from 7.28%. The swaps market has 70 bp of tightening for the next three months and another 100 bp in the following six months.   The greenback's 2021 low was set in March near MXN19.60.  

Chinese Yuan: The dollar slipped against the Chinese yuan last week to snap a four-week advance. Still, the exchange rate of the two largest economies appears to have found a new range:  CNY6.33-CNY6.38. Bad news could be good news for China in the sense that disappointing economic data bolsters the chances of a more significant policy response. In turn, this could spur fresh portfolio flows. It is not clear the significance of the momentum indicators on such a tightly controlled exchange rate, but the  MACD is stretched and, after pulling back a bit, looks ready to turn higher again. The Slow Stochastic has turned down more decisively.   Most emerging market currencies outside Latam (excluding Argentina) and South Africa have depreciated against the dollar this year. The Chinese yuan has by about 0.10%, making it the seventh-best performing emerging market currency.  


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Beloved mall retailer files Chapter 7 bankruptcy, will liquidate

The struggling chain has given up the fight and will close hundreds of stores around the world.



It has been a brutal period for several popular retailers. The fallout from the covid pandemic and a challenging economic environment have pushed numerous chains into bankruptcy with Tuesday Morning, Christmas Tree Shops, and Bed Bath & Beyond all moving from Chapter 11 to Chapter 7 bankruptcy liquidation.

In all three of those cases, the companies faced clear financial pressures that led to inventory problems and vendors demanding faster, or even upfront payment. That creates a sort of inevitability.

Related: Beloved retailer finds life after bankruptcy, new famous owner

When a retailer faces financial pressure it sets off a cycle where vendors become wary of selling them items. That leads to barren shelves and no ability for the chain to sell its way out of its financial problems. 

Once that happens bankruptcy generally becomes the only option. Sometimes that means a Chapter 11 filing which gives the company a chance to negotiate with its creditors. In some cases, deals can be worked out where vendors extend longer terms or even forgive some debts, and banks offer an extension of loan terms.

In other cases, new funding can be secured which assuages vendor concerns or the company might be taken over by its vendors. Sometimes, as was the case with David's Bridal, a new owner steps in, adds new money, and makes deals with creditors in order to give the company a new lease on life.

It's rare that a retailer moves directly into Chapter 7 bankruptcy and decides to liquidate without trying to find a new source of funding.

Mall traffic has varied depending upon the type of mall.

Image source: Getty Images

The Body Shop has bad news for customers  

The Body Shop has been in a very public fight for survival. Fears began when the company closed half of its locations in the United Kingdom. That was followed by a bankruptcy-style filing in Canada and an abrupt closure of its U.S. stores on March 4.

"The Canadian subsidiary of the global beauty and cosmetics brand announced it has started restructuring proceedings by filing a Notice of Intention (NOI) to Make a Proposal pursuant to the Bankruptcy and Insolvency Act (Canada). In the same release, the company said that, as of March 1, 2024, The Body Shop US Limited has ceased operations," Chain Store Age reported.

A message on the company's U.S. website shared a simple message that does not appear to be the entire story.

"We're currently undergoing planned maintenance, but don't worry we're due to be back online soon."

That same message is still on the company's website, but a new filing makes it clear that the site is not down for maintenance, it's down for good.

The Body Shop files for Chapter 7 bankruptcy

While the future appeared bleak for The Body Shop, fans of the brand held out hope that a savior would step in. That's not going to be the case. 

The Body Shop filed for Chapter 7 bankruptcy in the United States.

"The US arm of the ethical cosmetics group has ceased trading at its 50 outlets. On Saturday (March 9), it filed for Chapter 7 insolvency, under which assets are sold off to clear debts, putting about 400 jobs at risk including those in a distribution center that still holds millions of dollars worth of stock," The Guardian reported.

After its closure in the United States, the survival of the brand remains very much in doubt. About half of the chain's stores in the United Kingdom remain open along with its Australian stores. 

The future of those stores remains very much in doubt and the chain has shared that it needs new funding in order for them to continue operating.

The Body Shop did not respond to a request for comment from TheStreet.   

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Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super…



Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super Tuesday primaries have got it right. Barring cataclysmic changes, Donald Trump and Joe Biden will be the Republican and Democratic nominees for president in 2024.

(Left) President Joe Biden delivers remarks on canceling student debt at Culver City Julian Dixon Library in Culver City, Calif., on Feb. 21, 2024. (Right) Republican presidential candidate and former U.S. President Donald Trump stands on stage during a campaign event at Big League Dreams Las Vegas in Las Vegas, Nev., on Jan. 27, 2024. (Mario Tama/Getty Images; David Becker/Getty Images)

With Nikki Haley’s withdrawal, there will be no more significantly contested primaries or caucuses—the earliest both parties’ races have been over since something like the current primary-dominated system was put in place in 1972.

The primary results have spotlighted some of both nominees’ weaknesses.

Donald Trump lost high-income, high-educated constituencies, including the entire metro area—aka the Swamp. Many but by no means all Haley votes there were cast by Biden Democrats. Mr. Trump can’t afford to lose too many of the others in target states like Pennsylvania and Michigan.

Majorities and large minorities of voters in overwhelmingly Latino counties in Texas’s Rio Grande Valley and some in Houston voted against Joe Biden, and even more against Senate nominee Rep. Colin Allred (D-Texas).

Returns from Hispanic precincts in New Hampshire and Massachusetts show the same thing. Mr. Biden can’t afford to lose too many Latino votes in target states like Arizona and Georgia.

When Mr. Trump rode down that escalator in 2015, commentators assumed he’d repel Latinos. Instead, Latino voters nationally, and especially the closest eyewitnesses of Biden’s open-border policy, have been trending heavily Republican.

High-income liberal Democrats may sport lawn signs proclaiming, “In this house, we believe ... no human is illegal.” The logical consequence of that belief is an open border. But modest-income folks in border counties know that flows of illegal immigrants result in disorder, disease, and crime.

There is plenty of impatience with increased disorder in election returns below the presidential level. Consider Los Angeles County, America’s largest county, with nearly 10 million people, more people than 40 of the 50 states. It voted 71 percent for Mr. Biden in 2020.

Current returns show county District Attorney George Gascon winning only 21 percent of the vote in the nonpartisan primary. He’ll apparently face Republican Nathan Hochman, a critic of his liberal policies, in November.

Gascon, elected after the May 2020 death of counterfeit-passing suspect George Floyd in Minneapolis, is one of many county prosecutors supported by billionaire George Soros. His policies include not charging juveniles as adults, not seeking higher penalties for gang membership or use of firearms, and bringing fewer misdemeanor cases.

The predictable result has been increased car thefts, burglaries, and personal robberies. Some 120 assistant district attorneys have left the office, and there’s a backlog of 10,000 unprosecuted cases.

More than a dozen other Soros-backed and similarly liberal prosecutors have faced strong opposition or have left office.

St. Louis prosecutor Kim Gardner resigned last May amid lawsuits seeking her removal, Milwaukee’s John Chisholm retired in January, and Baltimore’s Marilyn Mosby was defeated in July 2022 and convicted of perjury in September 2023. Last November, Loudoun County, Virginia, voters (62 percent Biden) ousted liberal Buta Biberaj, who declined to prosecute a transgender student for assault, and in June 2022 voters in San Francisco (85 percent Biden) recalled famed radical Chesa Boudin.

Similarly, this Tuesday, voters in San Francisco passed ballot measures strengthening police powers and requiring treatment of drug-addicted welfare recipients.

In retrospect, it appears the Floyd video, appearing after three months of COVID-19 confinement, sparked a frenzied, even crazed reaction, especially among the highly educated and articulate. One fatal incident was seen as proof that America’s “systemic racism” was worse than ever and that police forces should be defunded and perhaps abolished.

2020 was “the year America went crazy,” I wrote in January 2021, a year in which police funding was actually cut by Democrats in New York, Los Angeles, San Francisco, Seattle, and Denver. A year in which young New York Times (NYT) staffers claimed they were endangered by the publication of Sen. Tom Cotton’s (R-Ark.) opinion article advocating calling in military forces if necessary to stop rioting, as had been done in Detroit in 1967 and Los Angeles in 1992. A craven NYT publisher even fired the editorial page editor for running the article.

Evidence of visible and tangible discontent with increasing violence and its consequences—barren and locked shelves in Manhattan chain drugstores, skyrocketing carjackings in Washington, D.C.—is as unmistakable in polls and election results as it is in daily life in large metropolitan areas. Maybe 2024 will turn out to be the year even liberal America stopped acting crazy.

Chaos and disorder work against incumbents, as they did in 1968 when Democrats saw their party’s popular vote fall from 61 percent to 43 percent.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Sat, 03/09/2024 - 23:20

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),




Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The U.S. Department of Veterans Affairs (VA) reviewed no data when deciding in 2023 to keep its COVID-19 vaccine mandate in place.

Doses of a COVID-19 vaccine in Washington in a file image. (Jacquelyn Martin/Pool/AFP via Getty Images)

VA Secretary Denis McDonough said on May 1, 2023, that the end of many other federal mandates “will not impact current policies at the Department of Veterans Affairs.”

He said the mandate was remaining for VA health care personnel “to ensure the safety of veterans and our colleagues.”

Mr. McDonough did not cite any studies or other data. A VA spokesperson declined to provide any data that was reviewed when deciding not to rescind the mandate. The Epoch Times submitted a Freedom of Information Act for “all documents outlining which data was relied upon when establishing the mandate when deciding to keep the mandate in place.”

The agency searched for such data and did not find any.

The VA does not even attempt to justify its policies with science, because it can’t,” Leslie Manookian, president and founder of the Health Freedom Defense Fund, told The Epoch Times.

“The VA just trusts that the process and cost of challenging its unfounded policies is so onerous, most people are dissuaded from even trying,” she added.

The VA’s mandate remains in place to this day.

The VA’s website claims that vaccines “help protect you from getting severe illness” and “offer good protection against most COVID-19 variants,” pointing in part to observational data from the U.S. Centers for Disease Control and Prevention (CDC) that estimate the vaccines provide poor protection against symptomatic infection and transient shielding against hospitalization.

There have also been increasing concerns among outside scientists about confirmed side effects like heart inflammation—the VA hid a safety signal it detected for the inflammation—and possible side effects such as tinnitus, which shift the benefit-risk calculus.

President Joe Biden imposed a slate of COVID-19 vaccine mandates in 2021. The VA was the first federal agency to implement a mandate.

President Biden rescinded the mandates in May 2023, citing a drop in COVID-19 cases and hospitalizations. His administration maintains the choice to require vaccines was the right one and saved lives.

“Our administration’s vaccination requirements helped ensure the safety of workers in critical workforces including those in the healthcare and education sectors, protecting themselves and the populations they serve, and strengthening their ability to provide services without disruptions to operations,” the White House said.

Some experts said requiring vaccination meant many younger people were forced to get a vaccine despite the risks potentially outweighing the benefits, leaving fewer doses for older adults.

By mandating the vaccines to younger people and those with natural immunity from having had COVID, older people in the U.S. and other countries did not have access to them, and many people might have died because of that,” Martin Kulldorff, a professor of medicine on leave from Harvard Medical School, told The Epoch Times previously.

The VA was one of just a handful of agencies to keep its mandate in place following the removal of many federal mandates.

“At this time, the vaccine requirement will remain in effect for VA health care personnel, including VA psychologists, pharmacists, social workers, nursing assistants, physical therapists, respiratory therapists, peer specialists, medical support assistants, engineers, housekeepers, and other clinical, administrative, and infrastructure support employees,” Mr. McDonough wrote to VA employees at the time.

This also includes VA volunteers and contractors. Effectively, this means that any Veterans Health Administration (VHA) employee, volunteer, or contractor who works in VHA facilities, visits VHA facilities, or provides direct care to those we serve will still be subject to the vaccine requirement at this time,” he said. “We continue to monitor and discuss this requirement, and we will provide more information about the vaccination requirements for VA health care employees soon. As always, we will process requests for vaccination exceptions in accordance with applicable laws, regulations, and policies.”

The version of the shots cleared in the fall of 2022, and available through the fall of 2023, did not have any clinical trial data supporting them.

A new version was approved in the fall of 2023 because there were indications that the shots not only offered temporary protection but also that the level of protection was lower than what was observed during earlier stages of the pandemic.

Ms. Manookian, whose group has challenged several of the federal mandates, said that the mandate “illustrates the dangers of the administrative state and how these federal agencies have become a law unto themselves.”

Tyler Durden Sat, 03/09/2024 - 22:10

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