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We cannot rule out profit-taking after three days of aggressive USD selling. The DXY Index has plunged by a whopping 3.1% to 104.32, around its 100-week moving average, in the first three days of this week. The overnight loss of 1.3% was the worst since November 2023. The DXY’s 5.2% plummet over the past eight weeks mirrored the 5.5% plunge in November-December 2023. DXY recovered in the first four months of 2024 on the Fed pushing back against the market’s aggressive bet for 7-8 rate cuts in 2024 vs. the three cuts projected by the Fed. Today, the market expects three Fed cuts vs. the two cuts in December’s Summary of Economic Projections.
The S&P 500 Index rebounded by 1.1% to 5842.63 overnight. US President Donald Trump granted a one-month tariff reprieve for US automakers operating in Canada and Mexico under the USMCA agreement, allowing them time to shift production back to the US. A better-than-expected ISM Services PMI report eased investors’ worries about the imminent US recession flagged by the Atlanta Fed GDPNow model. The headline index increased to 53.5 in February, beating the consensus for a decline to 52.5 from 52.8. The improvement was broad-based. New orders rose to 52.2 from 51.3, while employment increased a third month to 53.9, its highest level since August 2023. Today’s initial jobless claims are expected to decline to 223k for the week ending March 1 vs. 242k a week earlier. Not surprisingly, consensus maintained its call for Friday’s nonfarm payrolls to rise to 160k in February from 143k in January, defying the drop in ADP employment to 77k from 1867.
However, worries over tariff-driven inflation sustained the ISM Services prices paid index above 60 for a third consecutive month and lifted the US Treasury 10Y yield a second day by 3.4 bps to 4.28%. Speaking after the US jobs data on Friday, Fed Chair Jerome Powell should continue to urge patience on lowering rateson the recent boost in inflation expectations driven by tariffs. The Fed’s Beige Book survey of regional business contacts reported higher prices due to tariffs and a slight increase in economic activity since mid-January.
Quote of the Day
“Disinformation is more than just lying. It’s the denial and twisting of reality in order to present some desired image to the rest of the world.”
Will Hurd
March 6 in history
In 1869, Dmitri Mendeleev presented the first periodic table of the elements to the Russian Chemical Society.
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