With the Fed Fund Rate and the FOMC statement and press conference looming at 14:00 hrs EST, traders will be watching the Fed closely to see if they hike interest rates beyond the expected 25bp.
The CPI dropped from 0.2% to 0.1% on the 18th of January, as forecasted, so traders may be going into today’s announcement with some optimism off the back of some relief from inflation.
However, our own analysis is based on watching the preemptive positioning of the main players in the bond markets.
There have been rotations rolling out of both the 30y and 10y yields showing slowing growth in the US Economy over the last few weeks.
We’ll be watching the US Curves for narratives, but we can see in London that the Bond traders were buying flatteners. We’ll be watching for New York to see if this continues
We see a massive drop in the CPI Index over the past three days showing easing off of Inflation as least for the past three days.
We also see a massive drop on the CPI Index from yesterday, with mixed data coming from the US from the previous month. We might likely see the Fed not throwing any surprises at the FOMC today. We probably would get a 25bps add to the interest rate with no aggressive follow-up in terms of hawkish tones from the conference. A big surprise would be seeing the Feds deciding not to hike rates at all given the present circumstances and that would lead to further bleed on the US dollar.