Fed rate hike expectations increase
BY Janne Muta, M.Sc in Finance|juin 8, 2023
Equity markets got spooked by the two recent rate hikes from the RBA and the BOC. Bonds sold off sending the yield-sensitive Nasdaq lower. Investors are starting to think the Fed might hike next week. The Bank of Canada surprised markets yesterday with a 25 basis-point interest rate hike, following the earlier surprise hike by the Reserve Bank of Australia. The BOC rate hike to a 22-year high was driven by inflation concerns as the labour market and consumer spending remained strong.
The US bond market was under pressure after the BOC rate decision, with yields rising and prices falling on fears of further rate increases. Expectations for the Federal Reserve's rate hikes have risen, but there is speculation that the Fed may pause rate hikes before raising borrowing costs later on. The probability of the Fed hiking by 25 bps next week increased to 36% from 22% the previous day, according to the CME FedWatch tool.
Nasdaq declined 1.88% while Dow managed a modest increase of 0.30%. DAX followed the lead and declined 0.58%, and FTSE ticked lower by 0.11%. Gold dropped 1.19% as the T-bond market sold off and the 10 yr yield moved strongly higher. USOIL gained 1.43% and created a higher daily low suggesting the production cuts are having an impact even though investors have been concerned about global oil demand. The EURUSD remained practically unchanged while USDJPY gained 0.38%.
EURJPY is bullish above 148.62. Below the level, the market could trade down to 148.05.
USDJPY remains bullish above 138.45. Below the level, look for a move to 137.50.
EURCAD is bearish below 1.4383. Above the level, the market might move to 1.4420.
USOIL is bullish above 71.09 and could trade up to 74.30. Below 71.09, the market probably moves to 70.30.
The Next Main Risk Events
- CHF SNB Chairman Jordan Speaks
- USD Unemployment Claims
- CNY CPI
- CNY PPI
- CNY New Loans
- CAD Employment Change
- CAD Unemployment Rate
For more information and details see the TIOmarkets economic calendar.
Chief Market Analyst
DISCLAIMER: TIOmarkets offers exclusively consultancy-free service. The views expressed in this blog are our opinions only and made available purely for educational and marketing purposes and do NOT constitute advice or investment recommendation (and should not be considered as such) and do not in any way constitute an invitation to acquire any financial instrument or product. TIOmarkets and its affiliates and consultants are not liable for any damages that may be caused by individual comments or statements by TIOmarkets analysis and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his/her investment decisions. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances, or needs. The content has not been prepared in accordance with any legal requirements for financial analysis and must, therefore, be viewed by the reader as marketing information. TIOmarkets prohibits duplication or publication without explicit approval.
Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.
Silver technical analysis | USD Strength Weighs on Silver
Silver technical analysis report shows the silver market trading near to a key daily timeframe price level at 22.80. Read this report to see how the latest Fed dot-plot and the USD strength h...
USDCHF analysis | USDCHF approaching key weekly resistance area
This USDCHF analysis report provides an exhaustive analysis of the USDCHF currency pair. We analyse the weekly, daily and 4h timeframes and provide you with both technical and fundamental per...
GBPAUD analysis | Economic divergence intensified selling in GBPAUD
This comprehensive GBPAUD analysis focuses on the GBPAUD currency pair using multi timeframe analysis as well as examines the fundamental landscapes in both the UK and Australia. On the tec...
Trade responsibly: CFDs are complex instruments and come with a high risk of losing all your invested capital due to leverage.