Morning Brew May 3 2023
Senior Relationship Manager
Summary: US Rate decision out today - Hawk or Dove?
The Probability of a hike tonight is priced in with a probability of 86% and the remaining 14 are in favor of no action. The year end rate is seen at 40 Basis points below the current level at 4.43%. This means Interest rate traders see one hike and 2 and a half cuts before year end.
If we accept the hike as given, the press conference will be the key event and any comments Powell will make regarding the impact of the banking crisis. At the last meeting he stressed the fact that tighter credit by banks due to the crisis would have the same impact as rate hikes and that could lead him to be less hawkish than called for by the inflation. Ordinarily inflation is declining but not enough to signal a pause.
Yesterday Indexes lost app 1% as banks came under renewed pressure and worries about a US debt crisis. This fueled risk off sentiment. The Regional Bank index lost 5.5% and energy 4.3%.
Overnight, indexes rise again by app. 0.3%, the GER 40 is back at 15800, the US 500 at 4127 and the US tech 100 at 13.115.
The 2 Year yields trade at 4% ant he USD Index at 101.80. EURUSD Is trading at above the 1.10 again, GBPUSD near 1.25 and USDJPY 136. Gold broke above initial resistance to trade at 2015 and Silver 25.20.
Volumes were very high yesterday at almost 20% above average.
Imlied volatility remains low and if you are worried about a risk off move today, consider buying options as insurance.
Besides the FOMC there is a decent amount of earnings out today but the rate decision will be key. Technical level will be interesting to watch after todays close.
Data: Australia Retail Sales, Turkey CPI, EU Unemployment, US PMI, FOMC Rate decision
Earnings: Barrick Gold, Orsted, Airbus, BNP Paribas, Deutsche Post, Enel, UniCredit, Lloyds Banking Group, Qualcomm, CVS Health, Estee Lauder, MercadoLibre, Kraft Heinz
Data: International S&P PMI, ECB Rate Decision. US Labor Market,
Earnings: National Australia Bank, Anheuser-Busch InBev, Shopify, Novo Nordisk, Maersk, Volkswagen, BMW, Infineon Technologies, Uniper, Rheinmetall, Zalando, Shell, ArcelorMittal, Equinor, Apple, ConocoPhillips, Booking, Regeneron Pharmaceuticals, Zoetis, Becton Dickinson, EOG Resources, Ferrari, Fortinet
Data: DE Industrial Orders, CH Fx Reserves, US Nonfarm Payrolls
Earnings: ANZ, Macquire Group, Enbridge, Canadian Natural Resources, Adidas, Intesa Sanpaolo, CaixaBank, Cigna Group
Physically Settled Futures
EMBK3 will expire 02 May 2023 at 14:00 GMT
CK3 will expire 05 May 2023 at 09:00 GMT
FPK3 will expire 10 May 2023 at 15:00 GMT
GASOILUKMAY23 will expire 09 May 2023 at 15:00 GMT