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SK Hynix: NAND inventory levels in the fourth quarter were almost equivalent to those of DRAM.SK Hynix: DRAM inventory levels are expected to decline further.On January 29th, Elon Musk stated that Tesla needs to build and operate a factory called "TeraFab" to produce semiconductors. This massive project, costing billions of dollars, marks a further expansion of the companys business beyond its core electric vehicle operations. "To eliminate potential production bottlenecks over the next three to four years, we must build a Tesla TeraFab," Musk said. "A large-scale factory covering multiple stages, including logic, memory, and packaging, and it will be manufactured in the United States." Musk stated that existing suppliers, including TSMC, Samsung, and Micron Technology, cannot meet Teslas chip supply needs.On January 29th, a research report from CITIC Securities stated that the Federal Reserves decision to maintain its policy rate unchanged at its January 2026 meeting was in line with market expectations. Both the meeting statement and Powells remarks indicated signs of stabilization in the US unemployment rate, and Powell stated that the policy rate was in a good position. Powell predicted that tariff inflation would peak later than the first quarter, around mid-year, and that it remained uncertain whether Trump would introduce new substantive tariff policies. Therefore, CITIC Securities expects no further rate cuts during Powells remaining two meetings as Fed Chairman. Regarding asset prices, US stocks, bonds, and the dollar saw relatively small fluctuations, while gold prices were largely driven by geopolitical factors and market sentiment.On January 29th, a research report from CICC stated that the Federal Reserves decision to keep interest rates unchanged at its January meeting was in line with market expectations. Governor Wallers dissenting vote may be related to his desire to be nominated as the next Fed Chair. The monetary policy statement indicated that "the unemployment rate has stabilized," and Powell stated that monetary policy is "in the right place," suggesting a higher threshold for another rate cut in the near term. Beyond this, Powell did not provide much guidance and avoided other questions unrelated to interest rate setting. We believe the Fed is still likely to cut rates twice in 2026, but the first cut may be delayed until the second quarter. The core problem of the US economy is not insufficient growth, but rather income inequality and affordability pressures on ordinary families. These structural problems cannot be solved by monetary policy alone; instead, they may prompt the government to adopt more non-market interventionist policies to address voters concerns.

EUR/USD Expects Fourth Weekly Gains Above 1.0900 Despite The US Dollar's Rebound Advance Ahead Of US NFP

Daniel Rogers

Apr 07, 2023 11:42

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Despite a recent retreat, the EUR/USD bulls maintain control around 1.0920. This reflects the typical Good Friday inactivity and apprehension ahead of the US Nonfarm Payrolls (NFP) report released early in the day. The major currency pair was volatile on Thursday as a result of the US Dollar's initial rebound on fears of a recession, but ended the day unchanged as disappointing US data contrasted with stronger Eurozone data.

 

Fears of a recession in the world's largest economy were prompted by consecutive lackluster US data and falling US Treasury bond yields, giving USD bears a reprieve on Thursday morning. As traders prepared for the all-important NFP, the dollar's subsequent gains were reversed by another disappointing US employment report.

 

Despite this, US Initial Jobless Claims for the week ending March 31 rose to 228K from 200K anticipated and an upwardly revised 246K the prior week. Notable is the increase in Challenger Job Cuts from 77,77K to 89,703K in the given month.

 

Notably, Reuters fanned fears of a recession by citing the most recent decline in the preferred bond market indicator of Federal Reserve (Fed) Chairman Jerome Powell. The most reliable bond market indicator of an imminent economic contraction, according to Federal Reserve research, is the "near-term forward spread" between the forward rate on Treasury bills 18 months from now and the current yield on three-month Treasury bills.

 

According to Reuters, International Monetary Fund (IMF) Managing Director Kristalina Georgieva stated in prepared remarks on Thursday that the global economy is projected to expand by less than 3% in 2023, a decrease from 3.4% in 2022.

 

In other news, Germany's Industrial Production (IP) increased 0.6% year-over-year in February, versus market predictions of -2.7% and previous readings of -1.7%. Additionally, the monthly figures exceeded expectations by 0.1%, coming in at 2.0% compared to 3.7% previously. On Wednesday, Germany Factory Orders for February improved to -5.7% YoY from -12.0% previously revised down and -10.5% market expectations, while MoM growth came in at 4.8% compared to 0.3% expected and 0.5% previous readings.

 

Wall Street and US Treasury bond yields have both reduced weekly losses as a result of these strategies, but investors remain skeptical.

 

In the context of less liquidity surrounding the March US employment report, sporadic activity on the major markets can keep the EUR/USD inactive and prone to abrupt price swings. Notable is the fact that recent dovish Fed forecasts and disappointing US data generate expectations for a positive surprise and enormous price volatility thereafter.


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