From Marc Chandler at Bannockburn Global Forex:
Overview: The market has concluded that the Fed will hike rates today. The US two-year yield has risen from about 3.63% at Monday's lows almost 4.20% yesterday. It needs to rise to 4.35% to recover half of its decline since March 8 but has come back softer today. Meanwhile, the banking crisis continues to ease, and Europe's Stoxx 600 bank index is up 1.5%, its third consecutive advance. The US KBW bank index rallied almost 5% yesterday.
Still, while the dollar drew support from the adjustment of Fed views yesterday, it is mostly softer today, ostensibly on ideas that today's hike could be the last in the Fed's cycle. That said, we suggest below that the median forecast by Fed officials will likely see a terminal rate a little higher than it had in December. Today's sterling is leading the move against the dollar on the back of a stronger-than-expected CPI report, which has bolstered the confidence of a quarter-point hike tomorrow. Norway's central bank is also expected to hike by 25 bp tomorrow, while the Swiss National Bank is seen delivering a half-point hike. Asia Pacific and European equities advanced, but US equity futures are narrowly mixed. European benchmark 10-year yields are mostly 2-3 bp higher, though the strong CPI figures are lifting the 10-year Gilt yield by nearly seven basis points (to 3.43%). The US 10-year Treasury yield is three basis points softer at 3.58%. Gold is consolidating yesterday's sell-off that saw it extend its retreat from Monday's high near $2010 to almost $1935. The softer dollar and softer US rates may be helping it stabilize today. May WTI extended its recovery from below $65 on Monday to about $69.80 yesterday. It is in a narrow range below yesterday's highs ahead of the North American session....
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