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The European Commission upgraded its 2023 growth forecast, but the pair is little changed, as markets brace for the latest CPI inflation data from the US on Tuesday
The markets have likely been running on the blowout non-farm employment change (NFP) released on 3rd Feb (orange dashed vertical), over any Fed communication. This suggests a heavy reliance on data and tomorrow we get the CPI at 1:30 pm GMT.
FXCM’s USDOLLAR is correlated with the real US 10-year yield, with a correlation coefficient of 78% (bottom chart). The real rate is adjusted for inflation and represents the true cost of borrowing. It helps participants make better informed decisions.
The central bank of Australia delivered another 0.25% rate increase, after the recent surge in inflation, pointing to more tightening in the upcoming months
The US economy added 517,000 jobs in January and unemployment dropped to new five-decades low, which strengthens the Fed’s view on the appropriate policy path and sent the pair lower on Friday
The US non-farm employment change data shows that 517K jobs were created in January. It was a surprise to the upside and exceeded the most optimistic forecast. The unemployment rate declined further to 3.4%.
Both central banks raised their benchmark rates by another 0.5% as expected, but the Bank of England softened its messaging, whereas its European peer remained aggressive, despite some less hawkish elements
The ECB hiked rates by 50bps today, maintaining that another 50bps is coming in March. However, the press conference delivered by president Lagarde proved to be confusing. Besides, obscure phrases like “continuity in a steady state”, she pointed to data dependency and a “meeting by meeting” approach. This suggests the 50bps in March is not a done deal. The market interpreted the press conference as dovish and the EURUSD sold…
The Fed hiked rates by 25 bps yesterday. However, the Fed chair, perhaps mistakenly, loosened markets when he stated, “If we feel like we’ve gone too far, and inflation is coming down faster than we expect, then we have tools that would work on that.” The press conference offered little pushback against current market thinking. This caused risk assets to rally, and money to rotate out of safety, e.g., FXCM’s…
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