Stock Markets

Analysis-Euro’s stellar run in doubt as ECB muddies rate outlook

Published

1 year ago

July 28, 2023

Analysis-Euro's stellar run in doubt as ECB muddies rate outlook

By Naomi Rovnick and Dhara Ranasinghe

LONDON (Reuters) – Euro bulls are set for an anxious summer ahead as doubts creep in over how far the ostensibly still-hawkish European Central Bank will go with interest rate rises.

The euro has been on a stellar run, up roughly 3.5% against the dollar so far this year to just under $1.11. Measured against the currencies of the euro zone’s main trading partners, it is not far off this month’s record highs.

Investors are strongly positioned for the euro – which languished at two-decade lows against the greenback this time last year – to keep rising.

That view is primarily based on the belief that the U.S. Federal Reserve will end its most energetic rate rise cycle in 40 years before the ECB turns dovish.

Under the surface, investors and economists say, even the most hawkish ECB members will be looking for the end of tightening as inflation softens and economic activity weakens.

“I don’t have a high conviction on the euro,” said Gabriele Foa, co-portfolio manager at Algebris Investments, who said he had been bullish on the single currency at the start of 2023 while now maintaining a mild “long bias”.

The ECB, he added, would “keep the inflation-fighting mask on” for a few more months, while at the same time weak data would be “feeding into (ECB) communication and eventually policy”.

On Thursday, the ECB delivered a widely anticipated 25 basis points rate increase to a 23-year high of 3.75% and said inflation remained too high.

ECB President Christine Lagarde responded to most of the questions at a press conference by saying all options remained on the table to “break the back” of inflation, but sent the euro tumbling with a dovish flourish near the end.

“Do we have more ground to cover? At this point in time I wouldn’t say so,” Lagarde said, almost unprompted, stressing that the ECB’s decisions would depend on incoming data.

The euro fell 0.9% against the dollar, with stubborn inflation and a growing risk of a recession pulling policymakers in opposing directions.

The Federal Reserve on Wednesday also hiked interest rates but markets suspect that was its last tightening move. In contrast, money markets now price in a 40% chance of another quarter point ECB move in September.

BOUNCE BACK

A hawkish ECB, just as cooling U.S. inflation points to peak Fed rates, helps explain the euro’s recent rally. The currency is up roughly 10% from lows hit last year below the psychologically key $1-mark.

A trade-weighted index, that measures the euro’s value against a basket of other currencies and is followed closely by the ECB, is trading near record highs.

That is partly because of weakness in the yuan, which accounts for over 10% of the basket, and has been hurt by a lacklustre Chinese economy.

Speculators had the biggest net long position in the euro in nine weeks in the week ended July 18, CFTC data showed.

The path ahead was expected to be foggy over the summer as the market awaits new ECB inflation projections in September, fresh data, and assesses the Fed outlook. July euro zone inflation numbers are out next week.

“I’m a little sceptical of markets thinking that they (ECB policymakers) will twist at this point into a more dovish position,” said Francesco Sandrini, head of multi-asset strategies at Amundi, Europe’s largest asset manager.

“This is going to happen but only when inflation peaks … we’ll probably embark on a reversal like we are seeing already underway in the U.S., but that’s not a moment yet.”

Sandrini said Amundi expected the euro to rise to $1.15- $1.20 in the coming quarters, implying a further gain of at least 4% from current levels.

Further euro gains were not expected to unsettle policymakers since this would help keep the costs of imports – and overall inflation – down.

“Currency strength is welcome to battle inflation, it’s why the SNB for example does not mind about the franc,” said Societe General currency strategist Kenneth Broux. He was referring to the Swiss National Bank and a Swiss franc up over 7% against the dollar so far in 2023.

But with the jury very much out on whether the ECB will move again in September, the currency could as easily head down as back up, analysts said.

Monex Europe head of FX analysis Simon Harvey reckons, “the data will push back against the idea they can hike again in September”.

Euro zone business showed shrank much more than expected in July as demand in the bloc’s dominant services industry declined, data this week showed.

A euro level of $1.10, Harvey said, seemed fair.

Some were bearish.

Robin Brooks, chief economist at the Institute for International Finance in Washington, said a war in Ukraine that had left energy prices highly elevated pointed to a big terms of shock trade that should pull the euro back down.

“I don’t think the rally back from parity should have happened,” Brooks said.

Stock Markets

Consumers Energy Expanding Community Solar Program with 30-Acre Solar Project in Jackson County

Published

1 hour ago

September 20, 2024

JACKSON, Mich., Sept. 19, 2024 /PRNewswire/ — Consumers Energy plans to break ground next spring on Blackman Solar, a new 30-acre community solar array in its home Jackson County that will provide local clean energy to customers through its Solar Gardens program.

Consumers Energy this week received approval from Blackman Township for the community solar project, which is slated to start generating electricity by the end of 2025.

“Blackman Solar is a great example of a partnership with a community to develop a project that delivers reliable, clean energy as well as local tax and economic benefits,” said David Hicks. Consumers Energy’s vice president of renewable energy development. “We’re grateful for the reception we’ve received from Blackman Township leaders and are excited to continue developing solar projects like this on our path to a carbon-neutral electric grid.”

Blackman Solar will generate power for Consumers Energy’s Solar Gardens community solar program, in which customers choose to support new solar projects without having to own solar arrays.

The new community solar facility will be the fourth that Consumers Energy owns and operates, joining other Solar Gardens projects in Cadillac, at Western Michigan University and at Grand Valley State University. Blackman Solar will include nearly 5,000 solar panels and will generate up to 2.5 megawatts of renewable electricity for 2,500 future Solar Gardens customers.

Blackman Solar also will provide new capacity to expand Consumers Energy’s income-qualified Solar Gardens program MI Sunrise. MI Sunrise is an efficient, easy, cost-effective way for municipalities, nonprofits and tribal governments to deploy federal grant dollars, providing access to clean, reliable renewable energy and measurable financial benefits to offset energy bills.

“Blackman Solar will help meet increased demand for community solar and offers shared solar infrastructure, accessibility and inclusivity, as well as financial and environmental benefits for all customers,” Hicks said.

Consumers Energy is committed to Michigan’s clean energy future. The energy provider is closing its final three coal-burning units next summer, one of the nation’s most aggressive timetables. The company is developing solar projects as part of its Clean Energy Plan to be carbon-neutral by 2040.

Consumers Energy is Michigan’s largest energy provider, providing and/or electricity to 6.8 million of the state’s 10 million residents in all 68 Lower Peninsula counties. Consumers Energy’s Clean Energy Plan calls for eliminating coal as an energy source in 2025, achieving net-zero carbon emissions and meeting 90% of customers’ energy needs through clean sources, including wind and solar.

For more information about Consumers Energy, go to ConsumersEnergy.com.

Check out Consumers Energy on Social Media

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Stock Markets

First Horizon Is Now the Official Bank of the Ragin’ Cajuns

Published

1 hour ago

September 20, 2024

MEMPHIS, Tenn., Sept. 19, 2024 /PRNewswire/ — First Horizon (NYSE:) Corp. (NYSE: FHN or “First Horizon“) is proud to announce that First Horizon Bank is now the Official Bank of the University of Louisiana at Lafayette Ragin’ Cajuns.

This five-year agreement expands First Horizon’s long-term commitment to the University and includes a Ragin’ Cajun Visa (NYSE:) Debit card, prominent in-venue signage, entertainment and hospitality opportunities along with participation in game day fan activations and experiences, including the new Cajun Village.

“This is an exciting time to expand our partnership with ULL and ULL athletics,” said Jerry Prejean, President of Acadiana for First Horizon. “With more than $2.5 million invested in recent years towards academic and athletic excellence, First Horizon is proud to deepen our relationship with the University and work together as two long-standing community leaders dedicated to making Acadiana a great place to call home.”

“As opportunities have grown for businesses to support Ragin’ Cajuns athletics, First Horizon Bank has been right there growing with us every step of the way,” adds Brian Bille, General Manager of LEARFIELD-based Ragin’ Cajuns Sports Properties. “Jerry’s commitment to our community has never wavered, and I’m excited to help First Horizon build affinity with our fans through this enhanced partnership, and encourage our fans to add the all-new Ragin’ Cajuns branded debit card to their wallet.”

About First Horizon
First Horizon Corp. (NYSE: FHN), with $82.2 billion in assets as of June 30, 2024, is a leading regional financial services company, dedicated to helping our clients, communities and associates unlock their full potential with capital and counsel. Headquartered in Memphis, TN, the banking subsidiary First Horizon Bank operates in 12 states across the southern U.S. The Company and its subsidiaries offer commercial, private banking, consumer, small business, wealth and trust management, retail brokerage, capital markets, fixed income, and mortgage banking services. First Horizon has been recognized as one of the nation’s best employers by Fortune and Forbes magazines and a Top 10 Most Reputable U.S. Bank. More information is available at www.FirstHorizon.com.

Stock Markets

Oil prices rise on easing demand worries after jumbo Fed rate cut

Published

1 hour ago

September 20, 2024

Investing.com — Oil prices jumped Thursday, riding on a wave of risk-on sentiment as the Federal Reserve’s outsized interest rate cut on Wednesday eased worries that a slowing US economy would further dent crude demand.

At 2:06 p.m. ET (1906 GMT), rose 1.6% to $74.80 a barrel and rose 1.8% to $71.12 a barrel.

Jobless claims rise by less than expected

The number of Americans filing for first-time unemployment benefits rose by less than anticipated last week, with coming in at 219,000 in the week ended on Sept. 14, compared with an upwardly revised 231,000 in the prior week.

Economists had forecast a consensus figure of 230,000.

This figure was better than expected, and has allayed to a degree concerns over the health of the US economy, particularly after the Federal Reserve started its latest rate-cutting cycle on Wednesday, trimming interest rates for the first time since March 2020 by a hefty 50 basis points to a range of 4.75% to 5%.

While lower rates usually bode well for economic activity, the Fed’s aggressive cut sparked some concerns over a potential slowdown in economic growth.

While Fed Chair Jerome Powell helped soothe some of these concerns, he also said that the Fed had no intention of returning to an era of ultra-low interest rates, and that the central bank’s neutral rate was likely to be much higher than seen in the past.

His comments indicated that while interest rates will fall in the near-term, the Fed was likely to keep rates higher in the medium-to-long term.

US inventories fall, but product stockpiles up

Government data released on Wednesday showed a bigger-than-expected, 1.63 million barrel draw in .

While the draw was much bigger than expectations for a draw of 0.2 mb, it was also accompanied by builds in and inventories.

The builds in product inventories sparked increased concerns that U.S. fuel demand was cooling as the travel-heavy summer season wound to a close.

Looking ahead, some expect further draws in domestic crude stocks as exports reaccelerate.

“We look for a significant rebound in exports across crude and products this week. Among products, our preliminary expectations point to draws in gasoline (-1.5 MM BBL) and distillate (-3.7 MM BBL) with a build in jet (+0.5 MM BBL),” Macquarie said in a recent note.

Crude deficit could boost Brent

Still, prices could be bolstered in the near-term by demand possibly outstripping supply in the fourth quarter, according to analysts at Citi.

A reported decision by the Organization of the Petroleum Exporting Countries and its allies to delay the beginning of a tapering in voluntary output cuts, along with ongoing supply losses in Libya, is predicted to contribute to a oil market deficit of around 0.4 million barrels per day in the final three months of 2024, the Citi analysts said.

They added that such a trend could offer some temporary support to Brent “in the $70 to $75 per barrel range.”

Meanwhile, the benchmark could be further boosted by a potential rebound in recently tepid demand from top oil importer China, the analysts said.

But they flagged that they still anticipate “renewed price weakness” in 2025, with Brent on a path to $60 per barrel due to an impending surplus of one million barrels per day.

(Peter Nurse, Ambar Warrick contributed to this article.)