How will US CPI data shape Fed expectations? [Video]
|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.
Treasury yields around the world tumbled sharply. The S&P500 was flat, while technology stocks and gold rallied.
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.
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.
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.
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