What Is Aiding Risk Appetite?

Focus: CURRENCIES

Dean Popplewell of MarketPulse shares his global perspective of the markets—as well as several currency pairs—given that he thinks this new month of March will be dominated by Central Banks, either by rhetoric or monetary policy moves.

Tuesday is the first trading day of a new month. In US equities, March has a recent record of 14 up and 7 down, similar to its 1950 track record (S&P 500 (SPX) has risen 43 times while falling 23 times). Overall, March is the fourth best month of the year for the S&P 500 with an average +1.2% gain (although less in a Presidential election year).

This month will be dominated by Central Banks, either by rhetoric or monetary policy moves.

Monday, ahead of the US open, the People’s Bank of China (PBoC) announced its eight cut to its reserve ratio (to +17%) since June 2011 effective March 1. It’s been seen as a reversal of strategy, Chinese authorities are relying on short-term cash injections ($100b of long-term cash) to stem capital outflows.

Central Bankers will be a focus over the next fortnight; the Bank of Canada March 9, the ECB March 10, Bank of Japan March 15, and FOMC March 16. Currently, the odds of a cut by the BoC are running at about +15%. For the FOMC, the markets see only a very small chance (+10%) of a rate hike, while the ECB could see more cuts into negative rates territory and/or extension of its QE. The BoJ’s Governor Kuroda reiterated that Japanese policy makers stand ready to lower NIRP further if necessary (¥113.05).

(In the overnight session, Japan sold 10-year debt with negative yield for the first time as the bond market there continues to react to the BoJ’s announcement of negative rates at the end of January.