London Open
Even although it was going to be a rubber stamp affair, a bit of unnecessary bickering from Senator Sanders threatened to hold up the bill because of objections around bailing out' big business.' At the same time, the Conservative Hawks were uncompassionate, deeming the unemployment parachute too generous. Eventually, the U.S. Senate voted unanimously to pass the $2 trillion fiscal package. The House will take it up on Friday, after which it will be sent to the president. But I think we've squeezed about as much juice out of this one as we're going to get for the time being.
Investors now have to judge whether tremendous policy support is sufficient to meet worsening economic conditions.
Indeed, Thursday's initial jobless claims data for the week ending March 21 offer an insight into how quickly the U.S. labor market is deteriorating, while the immediate reaction from the S&P 500 will signal whether this week's risk rally is premature. The all-time high in the series was in 1982 at 695k; consensus expects 1,640k. My calculations are way off as I have the number coming in closer to 4 million, I guess that means if I trust my data, I should be short.
The markets are struggling equating the increasingly restrictive government orders that will affect the real economy- which is much more important drivers of economic forecasts than the virus case count, with any appearance of "risk-on. “
The restrictions are intensifying and are going to cause more GDP estimates to tumble. We've already seen three and even four global GDP downgrade revisions from some of the best economic minds in the world in the span of two weeks as we morphed from a transitory health scare to possible global depression.
Orange Juice
Speaking of squeezing the juice!! Orange juice futures are the best performing asset so far this year as Covid 19 outbreaks are hitting both the supply and demand for orange juice. The immune-boosting properties are the demand side attraction while there are not enough tanker spaces with airlines not flying to bring the product to markets.
Currency markets
As expected, it was a relatively quiet day in G-10 as market makers were hiding in the pipes doing what they had to do and little else—mired in a USD funding squeeze, month-end flows, and execution pressure from Japan's fiscal year-end.
USDCNH short-dated swaps are about 200bp lower, while CNH continued to weaken against the basket on continued dollar funding demand.
Spot initially dipped following the much lower-than-expected fixing at 7.0692 but rebounded to the overnight high on the back of dollar funding demand. It eventually settled at 7.12-13 into the London open.
Funding pressure endures
Counterintuitive as this may seem, After the coordinated dollar swap arrangement led by the Fed on March 15, G10 FX cash has been getting more expensive by the day, with the take-up of USD funding over both 7d and 84 operations.
The Bank of Japan's operations have been particularly well-utilized, so far net raising over $131 bn for banks, exceeding that of the Swiss National Bank, European Central Bank, Bank of England and Bank of Canada. JPY funding has dealt as high as -0.1% from -9.5%
The March -April turn, which includes Japanese year-end funding concerns, is probably influencing markets also.