What does data-dependent mean?

Thoughts of the Day

We have been hearing for months now that the US Federal Reserve is data-dependent. It’s pretty much saying they’re not ready to commit on a path for future policy moves because they want to keep their options open.

Hence, they’re waiting for more data to decide and they will make their decisions when they have all the data available at that time. For now, subscribe to read the full report…

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Tradertainment

source: reddit.com

Day Ahead

Euro Area Inflation (headline: +2.4% YoY expected and prev, +0.6% MoM expected and +0.8% prev; core: +2.7% YoY expected vs +2.9% prev)

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What Happened Yesterday

Market Movements as of New York Close 16 May 24

US Initial Jobless Claims – The number of individuals claiming unemployment benefits in the US decreased by -10,000 to 222,000 for the week ending 11 May (vs 220,000 expected). This figure represents the third highest weekly claim this year, staying above the average of the previous nine months and indicating a softening US labour market.

Chinese Economic Data – Industrial Production: +6.7% YoY actual (vs +5.5% expected and +4.5% prev). Retail Sales: +2.3% actual (vs +3.8% expected and +3.1% prev). Unemployment Rate fell to +5.0%, the lowest level since Nov 2023 (vs +5.2% expected and prev). No reaction in the USDCNH. 

The US stock market opened almost unchanged from Wednesday. It traded within a narrow range, rising in the early New York session before sliding down in the latter half of the day. The S&P 500 finished -0.21% lower on the day (high: +0.33%, low: -0.23%), the Dow Jones slipped -0.10% (high: +0.36%, low: -0.11%) while the Nasdaq slid -0.21% (high: +0.39%, low: -0.23%).

The crypto market traded lower along with the US stock market with Bitcoin down -1.47% and Ether down -2.92%
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Headlines & Market Impact

Fed remains cautious on cuts even as data improves

Notable Snippet: Data this week offered the U.S. Federal Reserve good news on two fronts but policymakers haven’t openly shifted views yet about the timing of rate cuts investors are convinced will start this year.

Comments from Fed officials including the vice chair of the rate-setting Federal Open Market Committee, New York Fed President John Williams, acknowledged the positive turn this week when U.S. government agencies reported that consumer prices rose more slowly than expected in April, and that retail spending had not increased at all during the month in a possible sign consumers are pulling back.

But that hasn’t yet prompted policymakers to say anything concrete about when rates might fall, indicating as did Fed Chair Jerome Powell earlier in the week that while the baseline outlook remained for inflation to fall, they didn’t trust it fully after three months in which inflation data disappointed.

“I don’t see any indicators now telling me … there’s a reason to change the stance of monetary policy now,” Williams said in an interview with Reuters, adding that he did not expect the case for a rate cut to fall into place “in the very near term.”

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Chinese retailer JD.com’s low price strategy helps revenue beat expectations

Notable Snippet: Chinese online retailer JD.com (9618.HK) on Thursday reported first-quarter revenue that beat market estimates, as price cuts and discount coupons helped boost sales that have been hit by cautious consumers.

JD.com and traditional rival Alibaba Group (9988.HK) have been cutting prices and offering discounts to defend e-commerce market share in the world’s second largest economy, where consumers are gravitating toward low-cost, discount-focused platforms.

JD.com CEO Sandy Xu said that categories including general merchandise, electronics and home goods, particularly mobile phones, as well as apparel, were among the stand-outs for its retail platform.

“As our improved price competitiveness increasingly resonates with users, the growth of our user base in lower tier cities accelerated in Q1, overtaking growth in higher tier cities,” Xu said in a post earnings call with analysts.

JD.com’s U.S. listed shares were flat in early trade.

On Tuesday, Alibaba reported an 86% drop in quarterly profit, primarily due to valuation change from equity investments, though it beat revenue estimates.

JD.com’s non-GAAP net profit rose 3.4% to 8.9 billion yuan ($1.23 billion) and revenue was up 7% to 260 billion yuan in January-March, versus the 257.72 billion yuan average of 21 analyst estimates compiled by LSEG. Analysts see full-year sales growing 6.7%.

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BOJ has no immediate plan to sell ETF holdings, Governor Ueda says

Notable Snippet: Bank of Japan Governor Kazuo Ueda said on Friday the central bank had no immediate plan to sell its huge holdings of exchange-traded funds (ETFs).

“We must spend some time in deciding what to do with our ETF holdings, including whether to unload them in the future,” Ueda told parliament.

The BOJ ended eight years of negative interest rates and other remnants of its radical stimulus programme in March, including a framework to buy risky assets such as ETFs.

But the central bank has yet to lay out a plan to unload its huge holdings of ETFs and government bonds partly out of concern of destabilising financial markets.

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Sentiment

FX

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Best,
Phan Vee Leung
CIO & Founder, TrackRecord