The market is currently in a bullish mood and the next set of headwinds for this rally will be economic data, which will determine whether there is enough of a slowdown to halt rate hikes an
Another impressive day of market gains.
After the massive gains in the North American indices last Thursday and Friday, everything indicated that a corrective setback was possible, especially after comments from a Federal Reserve Wallet official who tried to calm investors' nerves by warning that a single CPI figure would not be enough to slow the pace of rate hikes. Other members of the Fed's Monetary Policy Committee, such as Brainard, insisted on slowing rate hikes in the coming meetings in order to assess the impact of the increases accumulated thus far. Market interest rates reflect this, with the 10-year bond trading at 3.86%, the lowest level in the last 30 days.
The market is currently in a bullish mood and the next set of headwinds for this rally will be economic data, which will determine whether there is enough of a slowdown to halt rate hikes and boost hopes of a soft landing.
Today, relevant price data, such as the producer price index, is published, which, if lower than expected, reinforces expectations of a drop in inflation.
US retail sales on Wednesday will also be closely monitored. Although the consensus is +0.8%, ex-cars and gasoline are +0.2%. Figures close to consensus represent the market's best-case scenario or better, with a slight negative bias. If they are too high, the rate hike debate will resurface, and if they are too low, they will fuel fears of a severe recession.
The US dollar continued to fall yesterday amidst this lower interest rate scenario. A report by Deutsche Bank analysts warned that the highest level of the dollar in this cycle has probably been seen and that the selling pressure could continue in the near future. This is also influenced by a feeling of improvement in the Ukraine war with news about talks between the United States and Russia and the advances of the Ukrainian army. This is especially benefited by the EUR/USD pair, which is trading again in the area around 1.0370, after some intraday setbacks. This level is the main pivot point whose breakout would pave the way towards the 1.0600 levels.
Sources: Bloomberg, Reuters
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