The GBP is the strongest and the JPY is the weakest as the NA session begins. The GBP moved higher after the stronger than expected CPI report this morning. The YoY moved up to 10.4% from 10.1% last month. The core moved up to 6.2% from 5.8% last month. The BOE will meet tomorrow and the expectations are more firmly planted in the 25 basis point hike to 4.25%. There had been some lessening of the expectations due to the banking concerns.
Meanwhile the Fed meets and announces their rate decision at 2 PM ET today. The expectations which was more split between no change and 25 basis points earlier in the week, is now pointing to a 25 basis point hike that would get the high of the range to 5%. What will be more of interest perhaps, is the dot plot as well as the expectations for employment, GDP and PCE inflation.
Below is the table from the December meeting. Real GDP was expected 0.5% for 2023. The unemployment rate is expected to move up to 4.6% and PCE inflation was expected 3.1% with the core 3.5%. The projected fed funds rate and terminal rate was expected at 5.1%.
The Fed has been resolute about their inflation fighting and desire to not repeat mistakes of the past by easing credit conditions too quickly. Service inflation remains high. Good inflation has come down and steadied. Nevertheless, the CPI inflation still came in at 6.0% for the headline number and 5.5% for the core measure last week. The Fed chair testimony on Capitol Hill prior to the banking issues stated that the Fed was prepared to pick up the pace of tightening if inflation pressures persisted. He did stress that there was still data including the employment report and the CPI data. He did not foreshadow the banking crisis however. Both the employment and the CPI was not exactly weak. The Fed and the Fed chair has a difficult job today and deciding and communicating what is best.
In other markets:
- spot gold is trading up about one dollar or 0.05% at $1940.30
- spot silver is down two cents or -0.10% at $22.33
- WTI crude oil is trading near unchanged at $69.70
- bitcoin is trading at $28,260. The recent high price this week reached $28,567
Premarket for US stocks are showing mixed/little change:
- Dow Industrial Average up 20 points after yesterday's 316.02 point rise
- S&P index is up one point after yesterday's 51.30 point rise
- NASDAQ index is down -6 points after yesterday's 184.57 point rise
European major indices are higher:
- German DAX +0.49%
- Frances CAC +0.35%
- UK's FTSE 100 +0.18%
- Spain's Ibex +0.14%
in the US debt market, yields are higher:
- two year 4.229%, +5.2 basis points
- five year 3.74%, +3.8 basis points
- 10 year 3.630% +2.4 basis points
- 30 year 3.756% plus a 2.0 basis points
