Market Recalibrates, Fed Holds Steady on Rate Outlookš
Markets took a breather yesterday, with equities treading water, US rates lower by a bp across the curve, while the USD softened amidst a still positive risk backdrop. USDCNY (as a proxy for USD-EM pairs) showed the most overbought RSI (in CNH terms) as investors have been swift in pivoting to the rate-cut narrative. On the credit side, IG spreads have tightened to the tightest levels since the GFC (2007), in part due to rising base treasury yields, and in part due to the return of yield hunting sentiment from asset managers.Today's lower-tier data set did little to move the needle, with soft housing sales, weak Chicago Fed activity, and slightly improved Philly Fed services offering little impact on market price action. The 2pm FOMC minutes also saw muted reaction afterwards, with the Fed pretty much in a holding pattern with the same party line of 'higher for longer' in the official text. BBG Headlines flashed:FED MINUTES: ALL ON FOMC AGREE TO āPROCEED CAREFULLYā ON RATESALL ON FOMC SAW RATES REMAINING RESTRICTIVE FOR SOME TIMEFED SEES FURTHER TIGHTENING IF INFLATION PROGRESS INSUFFICIENTfrom which markets remain undeterred that the Fed is done with rate hikes over this cycle, with Dec 2024 Fed Fund futures still pricing in 90bp of easing next year.
#USDSoftening #RateCutNarrative #CreditTightening #FOMCMinutes #RateOutlook
