CM Trade

Download APP to receive bonus

GET

Powell is clear

2023-03-09
996

Fed Chairman Powell's comments have turned more hawkish. Given Powell's hawkish comments, it is not surprising that the market is pricing in a terminal rate of 5.75%. Analysis of the SOFR options market shows that before Powell's comments, the market The terminal interest rate has been inclined to be higher..

[Powell has a clear attitude, data is more important]

The futures market is pricing in about a 30% chance of a 50 basis point hike. Powell made it clear that if the data showed that inflation continued to head in the wrong direction, the Fed would respond accordingly. Investors can see the reaction of the stock market, at this stage, they don't know how much CPI and PPI will be recorded, but Powell's statement is very clear. The market is very clear that the Fed will not be equivocal when it comes to data, especially if the data shows that inflation continues to climb or remains sticky.


[Traders digest the expectation that the European Central Bank will raise interest rates by 150 basis points by July]

For the first time, money markets have fully priced in expectations that the European Central Bank will raise interest rates by a cumulative 150 basis points by July after Federal Reserve Chairman Jerome Powell said the central bank was prepared to accelerate the pace of rate hikes if necessary. Market pricing shows that the European Central Bank will raise interest rates by 48 basis points this month, 47 basis points in May, 34 basis points in June, and 21 basis points in July; the deposit rate will reach 4.13 in October % peak, while the current level of interest rates is 2.5%.

[G7 consumption outlook is weak]

Consumer spending in the G7 is expected to be flat this year, with a modest recovery in 2024, better than during the global financial crisis, but the outlook is weak anyway. "While some key drivers of spending, such as energy prices, have improved, other factors such as higher interest rates, lackluster income growth, declining household wealth, exhaustion of reopening effects and reluctance to reduce excess savings point in the opposite direction," he said. . Several factors could support spending, such as a rapid decline in inflation, which would allow the central bank to lower interest rates, although this would also be accompanied by a sharp weakening in economic activity, Slater said.

[The euro is expected to continue to strengthen against the British pound]

Euro-sterling rose to the top of the 0.88-0.89 range on comments from ECB Governing Councilor Holzmann arguing for further sharp rate hikes, a trend that is likely to continue. “We think that will be the way to go this year, as EUR/GBP is expected to be lifted later this year when the BoE officially pauses its tightening cycle. "On Monday, European Central Bank Governing Council Holzmann said that the European Central Bank will raise interest rates by 50 basis points in the next four meetings to curb inflation.

[EUR/CHF may struggle to beat parity]

EUR/CHF is unlikely to sustain gains above par in the near term, despite the ECB signaling further aggressive rate hikes, with the SNB likely to follow suit. Although inflation levels in Switzerland remain relatively low, data since the start of the year has exceeded expectations in the SNB's December monetary policy review. This means that the Swiss central bank may raise interest rates by 50 basis points and signal further interest rate hikes at its meeting on March 23, while indicating that it may intervene in the Swiss franc if necessary.

[Australia's 2023-24 fiscal year wheat export volume may drop by 20%]

The Australian Bureau of Agricultural Resource Economics and Science predicts that Australia's wheat exports in the 2023-2024 fiscal year may decrease by 20% year-on-year due to a drier climate or a sharp decline in wheat production. Australia is the world's second largest wheat exporter. Thanks to abundant rainfall, the country's wheat exports in 2022-2023 will reach a record high of 28 million tons.

[House prices in the UK rose in February, reflecting an improvement in underlying drivers]

The latest data from Halifax, the largest mortgage lender in the UK, shows that house prices in the UK rose by 1.1% month-on-month in February, exceeding the forecast of 0.3%, and faster than the growth rates in January and December. Although the annual rate of house price growth has remained stable, the quarter-on-quarter data has picked up in recent months, reflecting an improvement in the underlying drivers. However, the market is not out of the woods yet, with a weak economy, high inflation, a crisis in the cost of living and the possibility of further rate hikes by the Bank of England this year. Halifax's data differs markedly from Nationwide's, which reported a 1.1% drop in home prices in February

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

Free Access
Daily Trading Strategy
Download Now

CM Trade Mobile Application

Economics Calendar

More

You May Also Like