From Marc to Market:
Overview: The failure of the Federal Reserve to push harder against the market's dovish views and the easing of financial conditions encouraged a risk-on trade that saw the dollar and yields slump and equities rally. There has been limited follow-through dollar selling today, and a small recovery ahead of the Bank of England and European Central Bank meetings. The intraday momentum indicators suggest a weaker US dollar in the North American morning is likely. Despite the talk of a petro-yuan and the like, most Middle East countries, but Qatar, raised rates after the Fed, and Hong Kong Monetary Authority did as well.
Most Asia Pacific bourses were mixed, but South Korea and Taiwan markets continued to rally and lead the region. Europe's Stoxx 600 is snapping a three-day drop and is recouping it in full of a 0.75% advance. US futures are mixed, with Meta's earning helping to lift the Nasdaq. The S&P 500 futures are a little firmer and the Dow a bit softer. The rally in US Treasuries spilled over and are lifting European bonds today. The UK Gilts, which have been seeing strong foreign demand are on fire. The 10-year yield is off 10 bp today, falling to 3.20%. March WTI recorded an outside down day yesterday, falling to almost $76 a barrel. It is consolidating today in the lower end of yesterday's range. Meanwhile, US natgas futures price is at its lowest level since early Q2 21....*****..... Europe
It is about the Bank of England and the European Central Bank today. The Bank of England will most likely hike 50 bp. As we noted, several large banks have switched their calls to 25 bp. If the BOE were to deliver that, sterling would likely come under pressure for the same reason the dollar did yesterday. The swaps market sees a terminal rate of between 4.25% and 4.50% from 3.50% now. A quarter-point hike may see the market adjust to a lower terminal rate. The leaves the ECB positioned to be the most hawkish of the three. ECB President Lagarde pre-committed to a 50 bp hike today, and the sticky core rate of January's CPI (though German data was noticeably missing) keep expectations for a 50 bp move in March high (~75% chance). The downside risks for the euro area have diminished, helped by a warmer winter, lower energy prices, and what appears to be a resilient labor market. The December eurozone unemployment rate stood at 6.6%, the cyclical low first reached last October. It was at 7.5% in Q4 19.....
....MUCH MORE
