#ForexChief #Fed #Powell #bonds #Futures #forexnews #stocks #worldnews #PCEindices⠀
⚠️ Market hopes in vain: the Fed’s reversal is not relevant yet
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📊 When Jeremy Powell starts his press conference tomorrow, the bond market will be especially attentive to listen and analyze every word. And size of the bet in this speech is not the most important information. Markets need to understand how, when and at what level the Fed will finally stop the rate hike cycle.
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Of course, there will be no specific answer, you will have to pay attention to the general tone of the conversation and hidden hints.
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Recall that in an attempt to control inflation, the Fed has already raised short-term rates five times this year, but after the increase in September by 75 basis points, the feeling of catastrophe only intensified.
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Last Friday, the 10-year US Treasury yield closed at 4.1%. Bond prices and yields are moving in opposite directions − a strong signal of an upcoming recession. In addition, on the bullish trend of bonds, large investors began to return to the treasury market.
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Futures on the federal funds rate are 100% sure that the Fed will raise the rate by 75 bp this week. The December meeting is still expected to rise by 50 bp, and the chance of a fifth consecutive increase of 75 bp it was estimated at less than 40%. The maximum level of the key rate, which is generally considered by analysts, is 4.9% (it is already 3.25%), a rate above 5% means a complete imbalance in the American economy.
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Last week's statistics already told the markets that the US economy is slowing down, but inflation is still high judging by the PCE indices. Before the last meeting, the Fed will have the opportunity to analyze two more releases of consumer price and wage statistics, and, most likely, they will not dare to tighten policy anymore.
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So it's too early to expect a severe policy reversal from the Fed. But listen to Powell carefully.
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Profits to y’all!