The US dollar and interest rates seem to be at a turning point, after recent corrections from an overestimation in 2023 Q4. This overestimation involved derivatives markets anticipating nearly seven quarter-point FED rate cuts this year. Last week, US 2 and 10 year interest rates reached new three-months highs, influenced by economic data and FED officials’ remarks. The market, repeating its pattern from last year, has aligned with the FED’s stance, and this realignment appears complete. I anticipate weaker US …
Month: February 2024
The US Consumer Price Index (CPI) and Producer Price Index (PPI) for January outperformed expectations, fueling a rise in US interest rates and supporting the dollar’s strength. However, this data is not anticipated to alter the Federal Reserve’s current policy stance. The validity of this view will be tested by statements from at least seven Fed officials in the upcoming days. With several important reports pending before the data-driven Federal Open Market Committee (FOMC) convenes again in roughly four weeks, …
In the latest financial developments, markets are undergoing adjustments following the late 2023 surge in rates and the dollar’s strength. The anticipated first Federal Reserve rate cut, initially expected in March, has now been delayed, with the likelihood of a cut in May dropping to its lowest point since the previous November. The forecast for rate reductions in 2023 has been scaled back significantly, now projecting approximately 4.5 quarter-point decreases (around 112 basis points), a notable decline from the six …
Every time the Bank of Japan (BOJ) continues its aggressive monetary easing, the common reaction is one of disbelief: “What are they thinking?” Especially as inflation climbed and central banks all around the world aggressively raised the rates, it seemed straightforward to question the BOJ’s approach. However, the final speech of Uchida Shinichi, thoroughly clarifies the strategy behind their decisions, offering (in my view) a comprehensive explanation for the BOJ’s persistent dovish stance. While there’s room to challenge various arguments …
US employment figures significantly surpassed expectations, with a notable increase of 353,000 jobs, nearly double the anticipated amount. This surge, along with a 0.6% increase in average hourly earnings—also exceeding predictions by twofold—underscored the Federal Reserve’s hesitation to confirm market predictions of a rate decrease in March and a subsequent rapid rate reduction cycle. Following the Federal Open Market Committee (FOMC) meeting, the US dollar weakened amid declining US rates and emerging issues among regional and some international banks linked …