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  • richard evans

Powell rocks the markets with hawkish message

Good morning

Happy International Women’s Day to one and all although of course more to the female readers, but in this day and age I’m not sure I am allowed to single out any one group.

I warned yesterday about being too complacent with the stability in the markets. I also mentioned that we were watching Powell for any hawkish signals. We certainly got them. He made it clear that Fed would act with a faster pace of tightening if incoming data warranted such a move, and added that the peak of rates is likely to be higher than previously expected. A peak of 6% is now looking possible, well done to Goldmans for pointing this out earlier. A 50bps rise at the next Fed meeting seems on the cards.

Unsurprisingly USD posted gains across the board with GBPUSD trading down from around 1.2000 to low 1.18s and EURUSD falling from 1.0650 to 1.0530 or so this morning. GBPEUR trades down to 1.1225, GBP once again suffering slightly more than EUR, ECBs Knot this time offering support for the single currency by saying ECB will be raising rates for some time after March, the current pace of rises could continue into May unless there is a material change in inflation.

Powell does speak again today although usually the wording is broadly in line with the previous days testimony. We also have US ADP employment numbers later today. Some look at this as an indicator of nonfarm payrolls, its not a brilliant correlation but reasonably important nonetheless and likely to offer continued support for USD unless it comes in much weaker than expected.

BoC rate announcement due this afternoon as well, no change expected after BoCs Macklem signalled that the previous 50bps rise would be the last for a while unless incoming data was far different from their expectations. I guess after Powell there is a risk of a more hawkish comment so perhaps buying an overnight 1.3750 usdcad put for 30 pips or so is a reasonable way of having some interest with limited risk.

I awoke this morning to a layer of snow, we’d been warned about a cold snap and it has certainly arrived although we have not had anywhere near enough to think about getting the sledge out. Its turned a bit sleety now so I think the snow could be gone today but temperatures look like they’ll remain low. Enjoy!

- 10.00 EU GDP

- 13.15 US ADP employment, goods and services trades

- 13.30 CAD merchandise trade

- 15.00 Feds Powell speaks

- 15.00 BoC rate announcement

- 19.00 Fed Beige book

- 23.50 Japan GDP

- 01.30 China CPI

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