The Federal Reserve remains on a restrictive course

We can conclude that the Fed is using every opportunity to communicate its highly restrictive stance to the market. Yesterday, such a signal was sent by Jerome Powell during The Washington Forum. Other representatives of the Federal Reserve also spoke in a similar tone.

Wall Street index results were mixed. Volatility was moderate. The dollar remained stable. The zloty was weakening dynamically from hour to hour. Oil lost slightly and US bond yields were still on an upward course. Data results from China gave somewhat conflicting signals.

The Fed wants more data

The Fed repeats its mantra that rates will remain high as long as necessary. This sentence, however, is so general that it does not add much new information, only... weakens the chances of interest rate cuts in June (which are already small at this point). The tone of the words of American policymakers is one: "the task of fighting inflation has not yet been fully accomplished." Federal Reserve wants more data, so we can only wait and closely observe price processes in the American economy.

Wall Street lacked decisive direction. Dow Jones gained 0,17%. while the other two benchmarks (Nasdaq Composite and SP500) lost 0,1 and 0,2 percent, respectively. The yield on 2-year US treasury bonds increased by 7 basis points to 4,99%, and the yield on 10-year bonds increased by 7 basis points to 4,67%.

Markets continued to reduce expectations for Fed rate cuts this year. Fed Funds Futures contracts are trading at 12%. chances of a downward move of 25 bp by June.

Regarding the conflict between Israel and Iran, US Treasury Secretary Janet Yellen has made clear that The United States should tighten sanctions against Iran within a few days. The EU is expected to present some proposals as early as next week.

China's GDP is growing

Secondary data from the US housing market disappointed with worse results. The number of housing starts in March fell by 14,7%. m/m to 1,321 million (forecast -2,4%) and the February result was revised up to 12,7%. with 10,7 percent previously. March building permits dropped by 4,3%. m/m to 1,458 million (forecast -0,9%), and February was revised upwards to 2,3%. from 1,9 percent initially. Industrial production increased by 0,4 percent in March. month to month as indicated by the market consensus. Today we will find out The Beige Book fed.

Publications from the Middle Kingdom are also worthy of attention. China's GDP in the first quarter was higher than expected and amounted to 5,3%. on a year-to-year basis. However, monthly data suggests that growth slowed in March after a strong start to the year. Growth remained uneven. Investment was solid, supported by policy stimulus, but consumption remained weak. Mixed signals from improving PMIs and slowing activity growth in March raise questions about whether the economic recovery seen earlier this year can be sustained.

Source: Łukasz Zembik, OANDA TMS Brokers