The Fed rhetoric remains "bullseye focused" on the plan to tighten further into the end of year at least, with 2023 not seeing any lowering of rates
The Fed rhetoric remains “bullseye focused” on the plan to tighten further into the end of year at least, with 2023 not seeing any lowering of rates. How far up rates go is a different story as they look to kill inflation in its tracks. The Fed has made it’s bed and to expect different than what they have said they were going to do, is unlikely.
As a result, the rates saw another move back higher today which has seen the 10 year extend to 3.823%.That is near the midpoint of the range since the peak on Septmber 28 (high at 4.01% and low at 3.56%). Rates just got to low earlier this week.
The move higher in rates has seen the 10 year move up 6.5 basis points today. The 2 year is up 10.4 basis points to 4.25%.
The higher rates helped the USD move higher again today. The USD is the strongest of the majors. The GBP is the weakest as investors shy away from their debt.
The strongest to the weakest of the major currencies
The commodity currencies also fell as risk-off flows – along with technical breaks – shifted the bias back to the downside for those currencies (and toward a stronger greenback). The AUDUSD moved below its 100/200 hour MAs and got to within 30 pips of its 2022 low from last week. Both the NZDUSD and the USDCAD also broke through their 100/200 hour MAs and raced away.
In the US stock market today, price action was up and down, but closed lower for the 2nd consecutive day. The Dow was the weakest with a decline of -1.15%. The S&P fell 1% and the Nasdaq fell -0.68%.
Tomorrow is the US jobs report. For a review of what to expect, see Adam’s post HERE. It is a big one as the markets A strong report will push up rate expectations and prolong the rate hiking cycle while a soft reading will kick off another ‘Fed pivot’ trade. It’s a very fine line that will depend on headline jobs, unemployment and earnings metrics.
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