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April 29th - Kalshis market pricing forecasts indicate that the market now sees only about a 50% probability of a Federal Reserve rate cut before 2027, a significant drop from the 80-90% probability earlier this year. As the Federal Open Market Committee (FOMC) meets, the market is effectively pricing in a "higher interest rate environment for a longer period," suggesting a lack of confidence in near-term monetary easing.Interest Rate Decision 1. Interest Rate Level: The benchmark interest rate was kept unchanged at 2.25% for the fourth consecutive meeting, in line with market expectations. 2. Forward Guidance: Further interest rate hikes may be necessary if rising energy prices lead to widespread inflation; interest rate cuts may be necessary if the US implements "significant" new trade restrictions. 3. Impact of Oil Prices: There is no clear evidence that oil prices have been widely transmitted to the prices of goods and services. We are prepared to take action if energy prices remain high. 4. Economic Outlook: Economic growth forecasts for this year and next have been revised upwards. The impact of the Middle East war on Canadas overall economic growth is expected to be minimal. 5. Inflation Expectations: The average inflation forecast for this year has been revised upwards, while the 2027 forecast remains unchanged. Inflation is expected to peak at around 3% in April. Governors Speech 1. Forward Guidance: Interest rate hikes may be necessary if energy prices remain high, but there is currently no specific timetable. Todays statement should not be considered forward guidance. 3. Economy and Inflation: There is currently some spare capacity in the Canadian economy. Inflation expectations may not be as stable as before the pandemic, and there are risks involved. 4. Impact of Oil Prices: We do not believe that rising energy prices will quickly spread to the goods and services sector. Responses to high oil prices depend on whether upward pressure on the CPI will spread.The yield on UK 2-year government bonds rose to 4.58%, its highest level since March 27, up 13 basis points on the day.Iranian Foreign Ministry: The Iranian Foreign Minister spoke with the Polish Foreign Minister.Markets are increasing their bets on interest rate hikes by the Bank of England, with pricing in three 25-basis-point increases expected in 2026.

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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