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Although the Federal Reserve is still expected to begin cutting rates before its global peers – and to move more aggressively when it does – the “pivot” horizon has moved out in recent months. Markets are pushing “pivot” expectations out. Overnight index swap-implied policy rates, %
As had been clearly telegraphed and widely anticipated, the Federal Reserve opted to hold interest rates at yesterday’s meeting. Officials said “Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy,” and Jerome Powell avoided committing to any further moves, instead saying the July meeting would be “live” and dependent on incoming data. More unexpectedly, new projections showed policymakers expect to deliver two additional hikes by year end. But the “dot plot”, as the Summary of Economic Projections is colloquially known, has evolved into a strange hybrid between a forecast update...
After a rather torrid May, the AUD has sprung back to life over the past few weeks. At ~$0.6820 the AUD is around the top of its ~4-month range. The AUD has also outperformed on the crosses. AUD/EUR is near its highest level since mid-March, AUD/GBP has moved above its 50-day moving average (~0.5341), diverging interest rate and macro trends have propelled AUD/NZD over ~1.10 for the first time since late-February, AUD/CNH has touched a ~2-year high, and AUD/JPY is north of ~96 (heights it hasn’t been at since last September). There has been raft of important economic events and...
• US Fed. Rates kept on hold, but the Fed’s message was ‘hawkish’. Fed is forecasting another ~50bps of hikes this year. Market pricing looks too low.• Intra-day volatility. Markets whipped around by the Fed decision. US retail sales & jobless claims tonight. Data could influence Fed expectations & the USD.• AUD events. Australian labour force & China activity data released today. ECB policy meeting is tonight with another 25bp rate hike expected. Markets whipped around overnight, with the US Fed policy decision and Chair Powell’s press conference in focus. As was broadly expected, after hiking interest rates aggressively over...
Longer-term rate expectations remain remarkably well-anchored. Midpoint of target range for the Federal Funds Rate, Statement of Economic Projections % March 2023 June 2023