The focus is hopefully going to shift back to the real economy now and that will include tomorrow's PCE report and Friday's CPI. During the time when the war dominated headlines, the news on the US economy was mostly good, highlighting that the economy was improving in February before bombs started falling.
The big news today is the $19 decline in WTI crude oil prices, or 17.5%. That's a big retracement in inflation and a huge help for the Federal Reserve, which is now in a much better spot to 'look through' the energy price spike because it's now time-limited.
Looking at the 2-year yield, we can see that it touched the lowest since March 18 today but it's still a long ways back down to the 3.4% pre-war zone. That's because the spike along and lost oil is going to make it difficult to get oil back to $60.
Looking at Fed funds futures, the April 29 meeting isn't live and it's the same thing for the June 17 meeting. Those are the final two meetings with Jerome Powell as Chairman.
Looking further out, the market is now pricing in 10.5 bps of easing this year, or a 42% chance of a cut. That's up from virtually nil last week.
Shifting to Europe, the odds of a hike at the April 30 meeting have plunged to just 31.5% but that rises to 71.9% for June and 91% for September. Previously the market had priced in two rate hikes.
