US yields spike after inflation report. Will the Fed cut rates in 2024?

10YR Treasury yields hit 4.5%

U.S. Treasury yields on the benchmark 10-year note have reached their peak levels for the year at 4.5%. This surge reflects growing investor confidence and anticipation of tighter monetary policy, influencing forex markets by potentially strengthening the US dollar against other currencies.

Fed interest rate cut unlikely for June

The likelihood of the Federal Open Market Committee (FOMC) slashing interest rates in June diminished dramatically this week, plunging from 60% to 20% following the April CPI report. With out a rate cut in June, the Fed’s anticipated 3 cuts in 2024 begins to look unlikely as well. This adjustment in expectations affects forex trading strategies, as the prospect of higher rates typically bolsters the dollar’s value.

CPI inflation rate 0.1% higher than expected

The March CPI inflation rates for both core and headline categories exceeded predictions by 0.1%, registering at 3.8% and 3.5% respectively. Even a marginal increase in inflation can signal persistent economic heat, prompting traders to consider the implications for the Federal Reserve’s rate decisions and, consequently, forex trading opportunities.

Will the Fed cut rates this year?

Now the probability that the Federal Reserve will not lower interest rates at all this calendar year has grown to 13.5%, up significantly from 1.3% the previous week (CME FedWatch tool). Such uncertain expectations around interest rate movements create a volatile forex trading environment, impacting currency pairs, especially those involving the USD.

US dollar hits 30-year high vs the yen

The USD/JPY pair has soared, now edging close to 153.00 after surpassing the 152.00 mark for the first time since 1990. This remarkable achievement underscores the US dollar’s enduring strength and offers forex traders critical insights into potential future movements against the Japanese yen.