T3 Monthly Insights - Apr 2024

The US economic growth slowed to nearly a two-year low last quarter while the consumer price index unexpectedly rose for the third consecutive month to 3.5% in March, sending treasuries yields higher in April. The DXY initially tested the 104.00 area before rallying strongly to 106.50, concluding April at 106.221 (+1.66% m/m). Market expectations for a mid-year easing have shifted, with the first anticipated rate cut now pushed to September.

Fuelled by a stronger greenback, the Euro faced selling pressure, testing support at the 1.0600 level before rebounding to close the month at 1.0666 (-1.15% m/m). The European Central Bank (“ECB”) maintained interest rates at 4.50% for the fifth consecutive meeting. In contrast to the Fed, ECB President Christine Lagarde provided strong indications of impending rate cuts, citing confidence in the Eurozone's inflation trajectory toward the 2% target. Sterling experienced similar price action, which was further exacerbated by the news out of Middle East when Israel launched a retaliatory strike on Iran. Pound slid to 1.2300, the lowest level recorded this year, before retracing to 1.2492 (-1.04% m/m) to wrap up April.

Despite Japan’s historic exit from negative interest rates last month, the Yen continued its downward trajectory, reaching 160.03 against the US dollar for the first time since 1990, after the Bank of Japan (“BOJ”) maintained its guidance on purchasing government bonds. Market speculation suggested that the BOJ intervened to halt the sharp decline in an effort to support a currency at 34-year lows. Yen eventually ended the month at 157.8, reflecting an over 11% loss against the greenback for the year.

Australian CPI data came in hotter than expected in the first quarter, driven by persistent pressure on service costs, prompting markets to abandon expectations for rate cuts this year. Following Israel's attack on Iran, the Australian dollar slipped below February's support level of 0.6450, reaching a yearly low of 0.6362. However, it regained bullish momentum for the remainder of the month, closing at 0.6473 (-0.74% m/m). The Reserve Bank of New Zealand kept the Official Cash Rate unchanged at 5.50% for a sixth straight meeting, as inflation at 4% is still distant from RBNZ’s target band of 1-3%. Kiwi fell to a yearly low approaching 0.5850 level, eventually closing the month at 0.5888% (-1.54% m/m).

Gold hit a record high of $2432 in April, despite prevailing interest rates and a stronger US dollar, underscoring its appeal as a store of value and a means of preserving purchasing power. Its ascent was further fuelled by escalating tension in the Middle East. Gold closed the month at $2286.25 (+2.53% m/m), recording a 10% gain against the greenback year-to-date.