Market activity has slowed this week due to the shortened holiday period, with trading volumes at around 70–80% of normal levels. Much of the recent focus has been on foreign exchange markets, particularly the yuan and yen, both of which have begun to weaken following recent meetings of the People's Bank of China and the Bank of Japan.
Volatility has increased in both currencies, with CNY/CNH being particularly volatile as traders prepare for the possibility of more easing from China, with the market looking particularly at levels around 7.30, where In line with the highs seen in the past 6 months.
In U.S. markets, the Atlanta Fed's Bostic reiterated his hawkish stance, saying he expects only one rate cut this year and that the Fed can be patient as long as the economy remains stable. Waller’s speech on Wednesday may be the highlight of the week, as Powell’s speech on Friday will take place when the U.S. market is closed. As a quick refresher, Waller has already said since February that there was "no rush" on the timing of a rate cut, and further reiteration of that view will raise questions about whether Powell is starting to lose consensus for his dovish claims.
On the stock market, the recent rally has brought the SPX Index to the year-end target price predicted by many Wall Street, causing strategists to scramble to update forecasts. With EPS revised upward, forward P/E multiples have also expanded. Next, unless Risk sentiment is likely to remain elevated if CPI really, really beats expectations, or the economy suddenly collapses, or the Fed takes a hawkish turn in the coming months.
