April started with a negative impulse provided by stern warnings from Powell and his Fed colleague Waller that rate cuts were looking much less likely. The subsequent data for the month confirmed that diagnosis, as March NFP started with a +300k blast, both headline and core March CPI came in higher than expected. So, the story continues with only 1 and change cuts now priced in by the Fed for 2024, backed up by strong retail sales and ECI. Similarly, BoE cut expectations were pared back with only the ECB consistent with their messaging for a June starting gun. Elsewhere Canadian, NZ, Australian and Swedish data has come in a little softer keeping hopes of cuts later this year. The relative hawkishness from the US has strengthened the USD and also peaked equity indices for the moment. Dispersion on rate cycles, being a recent phenomenon, has awoke FX volatility from a subdued period. Despite the first hike in 17 years by the BoJ, the JPY continued to weaken vs the USD, falling by over 4% during the month. With bear steepening in rates, FX vol increasing and equities faltering at the highs, it feels that we are going to have an active few months as we drift ever closer to election season in the UK and US. Exciting times ahead to navigate and take advantage of.
The US 10y closed the month 48bps higher and 5s-30s swap was 8bps flatter.
