Market Brief, North America

Markets are little changed this morning as a sense of calm returns after Tuesday’s traumatic reset in rate expectations. The dollar is dropping against most majors, yields are lower, and equity indices are slightly weaker ahead of two critical pieces of economic data – tomorrow’s non-farm payrolls report and next week’s consumer-price index – that could change the monetary policy outlook. In yesterday’s Congressional testimony, Federal Reserve chair Jerome Powell largely repeated Tuesday’s hawkish message, but added cautious qualifiers to soften the blow. “We have not made any decision about the March meeting,” he said, “If — and I stress...

The Bank of Canada held rates steady a few minutes ago, and many homeowners are probably experiencing feelings of relief, hoping for lower borrowing costs and a recovery in real estate values. But James Carville, Bill Clinton’s chief strategist (the important kind of strategist, not the FX kind) famously said: “I used to think that if there was reincarnation, I wanted to come back as the President or the Pope or as a .400 baseball hitter. But now I would want to come back as the bond market. You can intimidate everybody.” If US bond yields keep rising, bank funding...

Markets continue to brace for bigger and faster rate hikes from the Federal Reserve after Jerome Powell appeared to reverse earlier optimism about an ongoing “disinflationary process” during yesterday’s Senate testimony. Market-implied odds on a half percentage point move at the March meeting moves above 70-percent in the hours after the Fed chair’s appearance, and have barely subsided since. The two-year Treasury yield is holding above 5 percent for the first time since 2007, the dollar is trading higher, and most majors remain on the defensive. “The latest economic data have come in stronger than expected, which suggests that the...