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http://www.brotherjohnf.com/four-numbers-watch-fx-2/ – Four Numbers to Watch in FX. —
marctomarket.com / by Marc Chandler / 23 MAY 2017
The US dollar’s downside momentum faded today. While one should not read much into it, it could be an early sign that the market has discounted the recent news stream, which includes the fear that the political turmoil in the Washington will adversely impact the President’s economic program, and the continued above trend growth in the eurozone.
The Fed funds futures continue to discount a strong change of a June Fed hike. Bloomberg puts the odds at 95% of a hike, while the CME’s model says it is about 83% discounted. Our calculation puts it at 81%. A June hike would put the Fed funds target range at 1.00%-1.25%.
Although the two-year note is trading a few basis points through the top of the presumed new range, the odds that the Fed funds target range will be 1.25%-1.50% by the end of the year is also rising slowly. Bloomberg sees a 45% chance, up from about 28% a month ago. The CME sees the odds at 39% compared with about 30% a month ago.
European growth remains above trend and the flash May PMIs today suggest another strong quarter. However, price pressures remain elusive. Prices in the PMI fell for the first time in 15 months. To suggest the ECB could hike rates if it weren’t for the low inflation , is like asking, “Besides that Mrs Lincoln, how was the play?”
For the ECB with a single mandate, inflation is the story. Draghi has confirmed this many times. The market may be getting ahead of itself, not only the impeachment story in the US, but on how aggressive the ECB will be next month. It is not going to change what it is doing, such as taper. It is going to tell the market what it already knows. Eurozone policy rates have bottomed (deposit rate at minus 40 bp) and the risks to growth are balanced.
The post Four Numbers to Watch in FX appeared first on Silver For The People.
–(Published @ May 23, 2017 at 09:40PM by www.bitcoins.am™ Instant Real-time Bitcoin News Aggregation Source- From: ) #bitcoinnews
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