KBND - Week Ahead: With Markets Converging (Again) With Fed's Dots Is The Interest Rate Adjustment Over?
2024-02-24 08:05:00 ET
Summary
- With the help of economic data and comments by Fed officials, the market, as it did a few times last year, has converged to the Federal Reserve.
- The CSI 300 rose every day last week, as the mainland markets re-opened from the extended holiday.
- Another theme that we think is already emerged with Canada's January CPI last week and will be extended to the preliminary estimate of the eurozone's February CPI this week, is a sharp deceleration of inflation.
The US dollar and interest rates appear to be at an inflection point. Much of the past several weeks have been about correcting the overshoot that took place in Q4 23, when the derivatives markets were pricing in nearly seven quarter-point rate cuts by the Federal Reserve this year. US two- ( US2Y ) and 10-year ( US10Y ) interest rates set new three-month highs last week.
With the help of economic data and comments by Fed officials, the market, as it did a few times last year, has converged to the Federal Reserve. That adjustment seems to have run its course. We look for softer US economic data in the coming weeks, which may help cap US rates. At the same time, the technical condition of many of the G10 currencies has improved and momentum indicators are turning higher. Growth impulses are still faint in most other high-income countries, but the key, as seen in Q4 23, are the developments in the US....
Week Ahead: With Markets Converging (Again) With Fed's Dots, Is The Interest Rate Adjustment Over?