BoE Interest Rate Expectations
A Fitch rating analyst called the British government’s plan to cut their deficit in half over two years as too slow and increases the country’s risk to shocks. Overnight index swaps falling to 47 bps demonstrates the markets concerns and dimming expectations for future tightening. Tomorrow’s NIESR GDP estimate for February could help raise the outlook for yields if growth is expected to build upon January’s 0.4% improvement. Industrial production
for January will also cross the wires with forecasts for a 0.3% increase in output. However, based on the decline in exports that was seen in the January trade balance report, both indicators could disappoint validating policy maker’s cautious stance. U.K. interest rate expectations will most likely remain relatively unchanged until the release of the BoE’s minutes next week as markets are still looking for clues as to whether the central bank will add or bring an end to their QE efforts. To discuss this and trading ideas join the GBP/USD
FOMC Interest Rate Expectations
Fed funds futures continue to point toward rates remaining on hold for an extended period of time with a zero percent chance for a hike at the FOMC’s upcoming meeting. Looking out to August, markets are still leaning toward the central bank leaving monetary policy unchanged with a 28.0% chance of a rate hike. Advance retail sales for February has the most potential to alter expectations, the early forecast for a 0.1% decline in consumption may only serve to push out the horizon for future tightening.
Stock markets are struggling to hold onto earlier gains as there appears to be little conviction on the anniversary of the 2009 bottom. Traders continue to try and determine if the monumental appreciation over the past year has outpaced fundamentals. Despite beating expectations, last Friday’s labor report showed a job loss of 36,000. A weak labor market will continue to weigh on domestic demand with retail sales in February forecasted to have declined by 0.2%. Therefore, we could see consolidation and a continuation of the inclining wedge formation until then. Discuss this and other fundamental data join the Economics Forum.