Attention back to data, a measure of inflation

Yesterday, the appetite for risk returned to the market. Stocks around the world rebounded. The Nasdaq Composite was the best performer of the US indexes, closing the day higher by 1,8%. In Europe, the Dax gained 1,23 percent. On FX you can see little volatility on the major currency pair which oscillates around the level of 1,0850. Often showing global market sentiment, the AUD/JPY pair rose for the third day in a row, touching the level of 88,8. In turn, the yield on US debt remained at a similar level. 2-year-olds indicate 4,11.

A measure of inflation

The market is still alive with problems in the US and European banking sectors. However, these are disappearing day by day. However, the lack of new information about the problems of another institution means that the market is increasingly moving away from this topic and is slowly preparing for the interpretation of data from the US and Europe. We will know the key ones only tomorrow. Again, an electrifying reading should be the report on American spending, and in particular the core PCE index, which is the Fed's preferred measure of inflation.

Forecasts indicate that the base rate will remain at 4,7 percent. y/y (similar to the month before). At the same time, the monthly change is expected to fall to 0,4%. from 0,6 percent previously. The release of short-term and long-term inflation expectations according to the University of Michigan report will also be important for the market. This is also waiting for us on Friday. In turn, the dynamics of price growth in Europe will be shown by today's and tomorrow's HICP and CPI readings for Germany, Spain, France and the entire euro area.

When the dust from the turmoil of the financial sector has settled a bit, the old dependencies for currencies, bonds and equities are back. Higher than expected March readings should support currencies region, because again the market will begin to interpret it as a factor inducing state institutions to continue restrictive monetary policy. When it comes to the market valuation of futures contracts, you can see less than 50 percent. likelihood of a raise interest rates in the US in May by 25 basis points. The market is still pricing in a total of around 60 bp cut in the cost of money until the end of the year.

What will we hear from representatives of the Fed?

Yesterday's stock market rally came despite reports that the FDIC may propose a program to raise funds from banks to fund a $128 billion deposit insurance fund. In this way, smaller regional lenders would be protected a the burden could fall on the larger banks. CFD based on Nasdaq100 testing local resistance around 13k. pt. Its breakout may trigger a slightly larger upward move. Then the way to 13.700 points will open, which corresponds to the highs of mid-August 2022.

Greater volatility in the market may also occur due to the speeches of Susan Collins and Thomas Barkin from the Fed scheduled for today. Janet Yellen, who recently caused a lot of panic in the market and caused falls on Wall Street just after the last decision of the Federal Reserve on the increase, will also express her opinion.

Source: Łukasz Zembik, OANDA TMS Brokers