Dollar Jumps 0.5% on Rate Hike Expectations
The US dollar has jumped 0.5% over the last couple of days of trading as rate hike expectations in the US increase ahead of the May rate announcement from the Fed. Non-Farm Payroll data on Friday came out just above expectation and this, alongside an upside revision in last month’s number and a drop in the unemployment rate has led to the market once again strongly pricing in a 25bps hike from the FOMC in a couple of weeks. Expect further volatility in the FX market as we hear from several FOMC members later this week alongside the key US data releases.
Stock Markets Calm Ahead of Inflation Data
US stock markets experienced relatively quiet trading over the Easter Monday holiday with the major indices all-seeing little in the way of movement and volume, the Dow rose 0.3%, the S&P 0.1% and the Nasdaq finished fractionally south of flat. Investors are preparing for more volatility within ranges this week as the market comes to grips with changing interest rate expectations and overall sentiment. We have seen sentiment flipping on an almost daily basis as traders try to negotiate the impact of data showing high inflation against concerns over recessionary conditions.
Calm Before the Storm Ahead this Week
Traders are coming back from their Easter breaks today and are strapping in for a storm of fresh information after the calm of holiday markets. Key inputs from the US include the latest CPI, PPI and Retail Sales numbers as well as the last Fed meeting minutes. In addition to that we have a rate announcement from the Bank of Canada as well as a plethora of central bank speakers sprinkled across the calendar. Given the volatility that investors have seen over the last few weeks, few are thinking that we’ve seen the last of it just yet.
