Markets believe that falling inflation in the US may convince the Fed not to continue its aggressive tightening of monetary policy. Some economists share the same view, saying that if there is no unexpected spike, which is exactly what happened in March, the growing economic pressure will convince the Fed to stop raising rates next month.
At the moment, Wall Street economists estimate interest rates to rise to an average of 5.1% year-on-year compared to 6% in February.
“Fed officials are going to look at incoming data, acknowledging that what is happening in the banking system will work in tandem with what they have already done with interest rates – raising them by almost 500 basis points,” former Pimco chief economist Paul McCulley said in an interview.
McCulley also called for a pause from the central bank, which contradicts a recent CME Group assessment that sees a 73% probability of a further quarter-point interest rate hike in May this year.
“I think that over the next week, we will get a general picture of what is happening and an understanding of where the Federal Reserve is going next,” he added.
According to McCulley, a deterioration in economic data combined with alarming activity in the Treasury bond market will be enough for the central bank to change its position. “I cannot help but note the importance of a severely inverted yield curve, which will lead to a constant outflow of deposits from the banking system,” he said.
The inflation data published yesterday said core inflation rose by 0.4% m/m after increasing by 0.5% in February. The overall index also increased by 0.1%, reflecting a decline in gasoline and natural gas prices. The forecast for the two is a 0.4% m/m rise for the core indicator and a 0.2% gain for the overall indicator.
In the forex market, euro bulls still have a chance to continue a rally and update the highs. But in order to do so, the quote has to stay above 1.0960 and take control of 1.1000. This will allow a rise beyond 1.1035 and towards 1.1060 to 1.1090. In case of a decline and lack of bullish activity around 1.0960, the pair will fall to 1.0930 and 1.0900.
Pound bulls also continue to have control over the market. However, the quote has to consolidate above 1.2510. That will trigger a much larger rise to 1.2550 and 1.2590. In case there is a decline, bears will attempt to take 1.2460, which could lead to a fall to 1.2410 and 1.2370.
The material has been provided by InstaForex Company – www.instaforex.com
Markets believe that falling inflation in the US may convince the Fed not to continue its aggressive tightening of monetary policy. Some economists share the same view, saying that if there is no unexpected spike, which is exactly what happened in March, the growing economic pressure will convince the Fed to stop raising rates next month.
At the moment, Wall Street economists estimate interest rates to rise to an average of 5.1% year-on-year compared to 6% in February.
“Fed officials are going to look at incoming data, acknowledging that what is happening in the banking system will work in tandem with what they have already done with interest rates – raising them by almost 500 basis points,” former Pimco chief economist Paul McCulley said in an interview.
McCulley also called for a pause from the central bank, which contradicts a recent CME Group assessment that sees a 73% probability of a further quarter-point interest rate hike in May this year.
“I think that over the next week, we will get a general picture of what is happening and an understanding of where the Federal Reserve is going next,” he added.
According to McCulley, a deterioration in economic data combined with alarming activity in the Treasury bond market will be enough for the central bank to change its position. “I cannot help but note the importance of a severely inverted yield curve, which will lead to a constant outflow of deposits from the banking system,” he said.
The inflation data published yesterday said core inflation rose by 0.4% m/m after increasing by 0.5% in February. The overall index also increased by 0.1%, reflecting a decline in gasoline and natural gas prices. The forecast for the two is a 0.4% m/m rise for the core indicator and a 0.2% gain for the overall indicator.
In the forex market, euro bulls still have a chance to continue a rally and update the highs. But in order to do so, the quote has to stay above 1.0960 and take control of 1.1000. This will allow a rise beyond 1.1035 and towards 1.1060 to 1.1090. In case of a decline and lack of bullish activity around 1.0960, the pair will fall to 1.0930 and 1.0900.
Pound bulls also continue to have control over the market. However, the quote has to consolidate above 1.2510. That will trigger a much larger rise to 1.2550 and 1.2590. In case there is a decline, bears will attempt to take 1.2460, which could lead to a fall to 1.2410 and 1.2370.
The material has been provided by InstaForex Company – www.instaforex.com
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