ECB Expectations Soften Sharply, No Consensus About What The Fed Will Do Next
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Monday was yet another ugly day for bank stocks around the world, as the selling pressure continued following the SVB debacle in the US last week.
The money flew into the safe havens.
Yields
Treasury yields around the world tumbled sharply. The S&P500 was flat, while technology stocks and gold rallied.
Fed
For now, the pricing on Fed funds futures suggests that there is slightly more than 70% chance of a 25bp hike next month, and slightly less than 30% chance for no rate hike.
US CPI
But the expectations could easily change after US CPI data due later today.
Both headline and core inflation are expected to have eased in February, but investors are cautious given that last month’s disappointment could be repeated this month.
Eurozone
In the Eurozone, traders now see less than a 50% chance for another 50bp hike from the European Central Bank (ECB) this Thursday, and the expectation of the peak ECB rate fell below 3.5%, from around 4% last week.
But despite the softening ECB expectations, the EURUSD flirted with 1.0750 yesterday, as the US dollar sank deeper across the board.
Watch the full episode to find out more!
- 0:00 Intro
- 0:42 Banks down, treasuries up
- 3:35 No consensus about what the Fed will do next
- 4:14 How could US CPI shape Fed expectations?
- 7:06 Tech, gold rally on tumbling yields
- 8:42 ECB expectations soften sharply, as well.
Ipek Ozkardeskaya
Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.
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