The AUD is the strongest and the CAD is the weakest as the market braces for the Fed rate decision that will be announced at 2 PM ET, followed by the hour long press conference with Jerome Powell starting at 2:30 PM.
The Fed is expected to hike by 25 basis points. A surprise would be if they get sold on front loading 50 bps (a Bullard suggestion), but that is NOT expected and if done, would likely be accompanied by detailed commentary on a "conditional" pause in hikes thereafter. Again, that would be a surprise if it were to happen.
With the 25 basis points the expectation, the focus will be on Powell and his guidance as the Fed and Powell moves toward the terminal rate landing. Will there more details to the plan? Remember at the last meeting the Fed guided the "dot plot" to a terminal rate of 5.10% (between 5.0% and 5.25%). That seems to still be the odds on favorite for the Fed. Hold on tight.
The markets divergence - to the Fed - is it feels the Fed will err into a recession and be forced to ease sooner rather than later. Powell is unlikely to tilt his thoughts that far, but a question on whether he and the Fed would be willing to ease if inflation does tumble, unemployment moves higher quicker would be a potential tilt. The Fed was wrong at the bottom. They can be wrong at the top.
The ECB flash CPI came in weaker at 8.5% vs 9.2% last month, but it did not have the German data which will be delayed until next week. The core remained steady at 5.2% on the month.
US mortgage applications fell 9% after a 7% gain last week the 30 year mortgage remained steady near 6.19% (16.2% last week). The ADP employment estimate will be released shortly without expectations of 178K versus 235K last month. Later today construction spending and ISM manufacturing data will be released. Construction spending is expected to remain unchanged MoM when it is released at 10 AM. The ISM manufacturing is expected to remain below 50 at 48.0. The JOLTs job data will also be released at 10 AM ET
Stocks are lower in early trading with the Nasdaq trading above and below unchanged in the early US hours.
Some stock earnings winners and losers this morning:
- T-Mobile missed on the top and bottom line
- Humana EPS was better than expected but revenues came up a touch short of expectations
- Boston Scientific EPS was later than expected but revenues came in as expected
- after the close yesterday, Snap reported EPS better than expected while revenues of $1.3 billion was in line with expectations. However they expect revenues to decline 2%– 10% year-over-year in Q1.
US yields are lower in premarket trading:
A stepped out of the market is showing:
- spot gold is trading up $2 or 0.1% at $1930.46
- spot silver is down $0.10 from -0.46% at $23.60
- WTI crude oil is trading up $0.32 at $79.19
- Bitcoin is trading at $23,040 down marginally on the day
in the premarket for US stocks, the major indices are modestly lower:
- Dow Industrial Average -125 points after yesterday's 368.95 point rise
- S&P index is down -11 points after yesterday's 58.83 point rise
- NASDAQ index -12 points after yesterday's 190.74 point rise
in the European equity markets, the major indices are higher:
- German DAX +0.38%
- France's CAC +0.23%
- UK's FTSE 100 +0.23%
- Spain's Ibex was 0.9%
- Italy's FTSE MIB +0.55%
In the US debt market, yields are lower:
- two year yield 4.182%, -2.4 basis points
- five year yield 3.582% -5.3 basis points
- 10 year yield 3.471% -5.7 basis points
- 30 year yield 3.600% -6.0 basis points
In the European debt market, the benchmark 10 year yields are mixed:
