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On July 30th, Seema Shah, Chief Global Strategist at Principal Asset Management, stated in a report that the Federal Reserves decision to maintain interest rates, given the dissenting votes of three committee members, appeared more like an internal debate than a consensus decision, confirming market expectations of a delicate balance before the meeting. The statement offered little new information, but these dissenting opinions conveyed a clear message: the Fed is not yet confident that the battle against inflation has been won. While a rate cut is currently unlikely, investors cannot rule out the possibility of another rate hike before the end of the year. Principal Asset Managements basic assumption remains that the Fed will remain on hold until the end of 2026 as underlying inflationary pressures ease, "but confidence in this view is low."On July 30th, Christian Hoffmann, head of fixed income at Chambord Investment Management, stated that the Federal Reserves decision to keep interest rates unchanged was "not a foregone conclusion," calling it a "disturbing pause." Despite some constructive inflation data, oil prices surged again amid increased geopolitical uncertainty. We are increasingly convinced that this is no longer a Fed that reveals its every move well in advance, nor one that frequently shares its thoughts on various occasions.On July 30th, Ed Hutchings, Head of Interest Rates at Aviva Investors, stated in a report that investors will have to adapt to greater uncertainty under the leadership of the new Federal Reserve Chairman, Warsh. While the Feds decision to maintain interest rates was largely in line with expectations, considerable uncertainty existed before the meeting regarding the outcome and subsequent wording. Under the new Fed Chairman, this appears to be something investors will have to adjust to.TD Cowen: Lowered its price target for Qualcomm (QCOM.O) from $225 to $175.French household spending rose 0.1% year-on-year in June, compared with 0.30% in the previous month.

EUR/USD Expects Fourth Weekly Gains Above 1.0900 Despite The US Dollar's Rebound Advance Ahead Of US NFP

Daniel Rogers

Apr 07, 2023 11:42

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Despite a recent retreat, the EUR/USD bulls maintain control around 1.0920. This reflects the typical Good Friday inactivity and apprehension ahead of the US Nonfarm Payrolls (NFP) report released early in the day. The major currency pair was volatile on Thursday as a result of the US Dollar's initial rebound on fears of a recession, but ended the day unchanged as disappointing US data contrasted with stronger Eurozone data.

 

Fears of a recession in the world's largest economy were prompted by consecutive lackluster US data and falling US Treasury bond yields, giving USD bears a reprieve on Thursday morning. As traders prepared for the all-important NFP, the dollar's subsequent gains were reversed by another disappointing US employment report.

 

Despite this, US Initial Jobless Claims for the week ending March 31 rose to 228K from 200K anticipated and an upwardly revised 246K the prior week. Notable is the increase in Challenger Job Cuts from 77,77K to 89,703K in the given month.

 

Notably, Reuters fanned fears of a recession by citing the most recent decline in the preferred bond market indicator of Federal Reserve (Fed) Chairman Jerome Powell. The most reliable bond market indicator of an imminent economic contraction, according to Federal Reserve research, is the "near-term forward spread" between the forward rate on Treasury bills 18 months from now and the current yield on three-month Treasury bills.

 

According to Reuters, International Monetary Fund (IMF) Managing Director Kristalina Georgieva stated in prepared remarks on Thursday that the global economy is projected to expand by less than 3% in 2023, a decrease from 3.4% in 2022.

 

In other news, Germany's Industrial Production (IP) increased 0.6% year-over-year in February, versus market predictions of -2.7% and previous readings of -1.7%. Additionally, the monthly figures exceeded expectations by 0.1%, coming in at 2.0% compared to 3.7% previously. On Wednesday, Germany Factory Orders for February improved to -5.7% YoY from -12.0% previously revised down and -10.5% market expectations, while MoM growth came in at 4.8% compared to 0.3% expected and 0.5% previous readings.

 

Wall Street and US Treasury bond yields have both reduced weekly losses as a result of these strategies, but investors remain skeptical.

 

In the context of less liquidity surrounding the March US employment report, sporadic activity on the major markets can keep the EUR/USD inactive and prone to abrupt price swings. Notable is the fact that recent dovish Fed forecasts and disappointing US data generate expectations for a positive surprise and enormous price volatility thereafter.


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