Markets still banking on 0.50% May Fed Rate hike.
Chicago Fed President Evans stated on Tuesday that the central bank needs to be mindful of a wage-price spiral and need to monitor for it. He added that it would be a great cause for concern if the inflation rate accelerated and that. He did express some hopes that the inflation pressures could be changing, but also commented that his expectation is that rates will need to rise above a neutral rate of around 2.50%.
Markets remained convinced that the Fed will lift rates by 0.50% to 1.00% at the May meeting.
Atlanta head Bostic stated that it was important to get to neutral as expeditiously as possible, but that rate hikes larger than 50 basis points were not on the table.
The US 10-year yield has increased further over the past 24 hours with a peak above 2.97% and the highest level since late 2018 as markets continued to fret over inflation pressures.
There was a slight correction on Wednesday with yields continuing to drive markets.
In contrast, the Bank of Japan again intervened in money markets to cap domestic yields after the 10-year yield hit 0.25%. Overall yield spreads maintained pressure on the yen and USD/JPY surged to a fresh 20-year high at 129.40 before a sharp correction. There was no evidence of Bank of Japan intervention to support the Japanese currency at this stage.
Latest opinion polls for the second round of the French Presidential election this weekend indicated that Macron would win 56.5% as he continued to build a stronger lead against National Front leader Le Pen. A Macron win would provide an element of Euro relief.
The conflict in Eastern Ukraine has continued to intensify as Russian forces gradually step-up their attacks on the Donbas. There is additional pressure for Western countries to provide additional weapons to Ukraine.
Oil and gas prices have retreated which has limited the potential market impact.
Geo-political developments will still be under very close scrutiny with a particular focus on Russian rhetoric.
The Euro was unable to gain any sustained relief on Tuesday as yield spreads remained against the single currency. A dip in energy prices provided only marginal relief for the single currency.
The overall yield structure continued to support the dollar. There was, however, a tentative overall dollar retreat on Wednesday amid pressure for correction. EUR/USD regained the 1.0800 level on Wednesday. USD/JPY posted fresh 20-year highs at 129.40 before a sharp correction to near 128.50.
Higher global yields also sapped Swiss franc support. USD/CHF posted 22-month highs above 0.9530 before a limited correction.
Sterling remained lifeless and held in tight ranges. GBP/USD continued to test support below 1.3000 before a recovery to 1.3025 amid the dollar retreat. GBP/EUR dipped lower to 1.2400.
Commodity currencies were unable to hold intra-day highs on Tuesday but moved higher again on Wednesday. AUD/USD managed to break above the 0.7400 level to 0.7420. USD/CAD dipped back below 1.2600 on Wednesday.
|07:00||EUR German PPI (Y/Y)(MAR)||26.20%||25.90%|
|07:00||EUR German PPI (M/M)(MAR)||1.40%|
|10:00||Euro-Zone Industrial Production (Y/Y)(JUN, 2012)||-2.10%||-2.60%|
|10:00||Euro-Zone Industrial Production (M/M)(FEB)||0.10%||1.30%|
|10:00||Euro-Zone Industrial Production (Y/Y)(FEB)||-1.30%|
|10:00||Euro-Zone Industrial Production (M/M)(MAR)|
|10:00||Euro-Zone Trade Balance(FEB)||-27.2B|
|10:00||Euro-Zone Industrial Production (Y/Y)(MAR)||-0.50%||-1.30%|
|12:30||Canada - Core CPI (Y/Y)(MAR)||4.80%|
|12:30||Canada - Core CPI (M/M)(MAR)||0.80%|
|13:30||CAD CPI (M/M)(MAR)||1.00%|
|13:30||CAD CPI (Y/Y)(MAR)||5.50%||5.70%|
|13:30||CAD New Housing Price Index (M/M)||1.10%|
|15:00||USD Existing Home Sales(MAR)||6.1M||6.02M|
|15:00||USD Existing Home Sales Change(MAR)||-7.20%|
|19:00||USD Federal Reserve's Beige Book|
|23:45||NZD CPI (Q/Q)||1.30%||1.40%|
|23:45||NZD CPI (Y/Y)||5.70%||5.90%|