Fed in focus as rate expectations fade

3 May, 2017

Fed in focus as rate expectations fade

Our prop desk has been relatively quiet over the last 24 hours, although we have seen some short interest on the Aussie dollar yielding results. Attempts at bargain hunting on gold and oil have so far proved fruitless, although the accompanying losses are - at least for now - limited.

There’s a relatively busy day ahead covering a myriad of asset classes and largely driven by data from the US. The Federal Reserve’s next call on monetary policy is a clear stand out event on the day, although the expectation here is that the hawkish slant is likely to find itself being toned down. ADP payroll readings also offer a precursor to Friday’s non-farms, whilst again from the US the non-manufacturing PMI reading will also be under scrutiny. US stock valuations may still be soaring, but is this being played out in the wider economy and how much longer can investors continue to back the idea of Donald Trump’s promised tax reform as justification for the never-ending equity rally?

6pm GMT sees the release of the next FOMC policy statement, although with US inflation flagging, there’s no meaningful expectation that we’ll see any indication of tightening today and as always it’s going to be the detail of the narrative that comes under the greatest scrutiny. Getting two more rate hikes through this year is looking increasingly challenging for Janet Yellen, so anything that serves to confirm this has the ability to squash US treasury yields and heap some pressure onto the greenback, too.

Yesterday’s better than expected UK manufacturing PMI reading served to give the pound a lift and allay some of those fears that had been building over the weekend break with regard to the forthcoming general election We now have the corresponding construction PMI print due at 8.30am GMT so another impressive performance here should serve to further bolster GBP crosses. With cable having retaken the 1.2900 handle, it’s the psychologically significant 1.30 that many will be looking to see a test of.

Oil prices have been under pressure of late with fears mounting that Opec won’t extend those production quota cuts, whilst production in North Africa has also been increasing. Today’s weekly oil inventory update could however provide some fresh direction here and with yesterday’s API prints showing bigger than expected falls in stockpiles, the expectation is this pattern will be maintained. Despite yesterday’s volatility, there’s a clear downward trend being displayed for crude – and by some accounts these risks pushing the asset into oversold territory. 


Source link  
Yellen's Testimony, BoC Interest Rate Hike, Big Bank Reports

Hawkish or Dovish, well today we have retrospective examples of its effect on the sentiment for a currency. In one case Yellen’s indication that national debt should be capped and that monetary policy should be gradual...

Gold Dropped as Forecasted

This is a notable day for several interrelated moves: the fall of the yen, the rise of the dollar, and the drop in precious metals. All these changes resulted ...

Deutsche Bank Derivative Loss

Although markets seemed to calm after last week’s activity, this doesn’t mean that the newsrooms are quiet. One of the big topics – is Deutsche Bank’s big derivative loss estimated at $60 million due to a risky bet placed on U.S. Inflation. According to Bloomberg.com...


Italy Commits 17 Billion Euros to Keep Veneto Banks Afloat

Italy arranged for one of the biggest bank rescues in history, with a cost of up to 17 billion euros ($19 billion) in order to wind up two failed banks in one of Italy's wealthiest regions. However, the deal- which was approved by the European Commission...

Oil in Bear Market

Yesterday we saw a continuation in the drop of oil prices, which rippled out into the markets – pulling down both US and European Stock with it. This is likely a result of fears due to the non-OPEC countries ramping up production to cover the gap left from the OPEC+ agreement to restrict production...

Brexit Update - The EU Wins Round 1

Although not an outright conflict, the discussions surrounding the Brexit talks have been at best contentious and at worse...


Economic Calendar: BoJ, ECB, US Housing

The previous week's economic calendar had the potential to destabilize some of the world's most traded currencies...

Is the USD Going Up After its Recent Drip?

The US dollar is showing signs of recovery against other major currencies, sans the GBP. After the Bank of England Meeting Minutes announced an increase of interest rates, GBP/USD prices saw a significant upswing. This resulted in GBP climbing from 1.2696 to roughly 1.2755...

US dollar saw a rapid drop

The US dollar saw a rapid drop of its price opposite other major currencies after the announcement of the less than positive and expected statistics regarding U.S. inflation and retail sales. Retail sales dipped significantly to 0.3% in May down from the 0.4% rate of the previous month...

  


Share: