Headlines:
- Nomura changes Fed call, now sees a 50 bps rate hike in March
- BNP now expects six rate hikes by the Fed this year, up from four hikes previously
- Dollar continues to surge ahead of North American trading
- The risk mood improves on the day
- US futures trim losses as dip buyers emerge
- Kremlin says US response does not address Russia's main security demands, concerns
- UK January retailing reported sales 28 vs 8 prior
- Germany February GfK consumer confidence -6.7 vs -7.8 expected
Markets:
- USD leads, CHF lags on the day
- European equities mixed; S&P 500 futures down 0.2%
- US 10-year yields down 1.1 bps to 1.835%
- Gold down 0.6% to $1,806.70
- WTI up 0.8% to $88.04
- Bitcoin up 0.7% to $36,604
It's all about the post-FOMC sentiment on the day as markets are looking to price in a more aggressive Fed following the more hawkish tilt by Powell & co. yesterday. Four rate hikes were the baseline previously but now we're seeing traders rushing to price in nearly five rate hikes in the aftermath.
Equities were pinned lower early on with US futures down by over 1% but recovered strongly as dip buyers emerged to trim losses to near unchanged levels ahead of the cash open. The balance of the risk mood will continue to be a key factor to watch ahead of the weekend.
In FX, things were more straightforward as the dollar continues to run rampant across the board.
EUR/USD tumbled from 1.1220 to 1.1153 - its lowest since June 2020. Meanwhile, GBP/USD retreated from 1.3330 to 1.3376 as sellers look to extend a downside break in cable on the day.
USD/JPY moved up from 114.70 to 115.25 as short-term yields continue to push higher. 2-year Treasury yields are now up to 1.20%.
Elsewhere, commodity currencies are keeping lower despite a recovery in equities with AUD/USD down 0.5% to 0.7070-80 while NZD/USD is keeping a downside push to test 0.6600 - down 0.6% on the day currently.
As markets are looking for a more aggressive rate hike pricing, gold is suffering as price is down another 0.6% to $1,806.70. The yellow metal has erased its good form in the past few weeks to sit lower now in January trading.
Meanwhile, oil is continuing to keep pace with recent gains as Brent clips $90 while WTI is up 0.8% to just above $88.
