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The conversation around lower rates has been a theme this week after US data disappointed, Canada CPI came in soft, BOE Bailey offered up dovish comments, and China slashed rates. The net result is a US Dollar back under pressure on a broad basis. read report
Activity is expected to pick up on Tuesday as we get back into full swing following the US long weekend holiday break. Sentiment as reflected through US equity futures is pointing a little south, though the currency market has been less bothered with the US Dollar on offer. read report
Over the past several days we’ve seen a serious adjustment in Fed rate expectations, with the market now only expecting 3.5 cuts in 2024, down from near 7 a month ago. All of this price adjustment comes from a less dovish Fed decision, stronger US jobs report and hotter US inflation data. read report
It hasn’t taken long for the market to look past a less dovish Fed decision, stronger US jobs report, and hotter US CPI. This latest reading of weak US retail sales and hope for more contained inflation data later today has been enough to get the market back to selling US Dollars and buying stocks back towards record highs. read report
We’ve spent a lot of time talking about how the market is committed to doing whatever it can to push for a narrative that is always pressuring the Fed into lower rates. This shouldn’t come as a surprise given the fact that lower rates means a more investor friendly market environment. read report
Investors have been hit with a series of blows in recent days, all of which have forced a serious reconsideration of Fed rate cut pricing in 2024. The other week, it was the less dovish Fed communication and stronger US jobs report. And this week, it was the hotter than expected US CPI print. read report
We haven’t seen much change in FX markets since the week got going and we talked about a lighter Monday calendar and positioning into today’s US event risk accounting for the directionless trade. Interestingly enough, US equities haven’t stopped doing their thing, continuing to extend their run of record highs. read report
As we come into the new week, there has been a clear storyline of western markets reconsidering 2024 rate cut bets. In the US, year-end fed funds are now sitting up at 4.2% from 3.65% last month. read report
The big takeaway this week is the striking disconnect between the messages we’re getting and the market’s response. By most indications, economic data and central bank speak have backed up the case for a less accommodative Fed rate cut path than what the market has been pricing. read report
The Fed has been quite vocal about pushing back on the need for imminent rate cuts. At the same time, the threat of regional bank contagion has been getting a little more attention. And yet, we continue to see investors dismissing any signs that might have stocks and risk assets wanting to go lower. read report
