On Thursday, the US dollar and Treasury yields rose due to Federal Reserve Chair Jerome Powell’s remarks suggesting the need for more US interest rate hikes to manage inflation alongside the Bank of England’s (BoE) larger-than-expected rate hike.
Despite the Swiss National Bank and Norges Bank’s benchmark rate hikes, central banks have concerns about global inflation and the impact of rate hikes on demand.
The BoE announced an unprecedented half-point rate hike, driving market expectations and economists’ predictions upward.
Powell reiterated that the US central bank’s tightening cycle was not over and “additional policy rate increases” were necessary to contain inflation.
The dollar index upped 0.4% to 102.41, and 10-year Treasury notes experienced yield increases, as investors focused on Powell’s hawkish comments.
Although the stocks witnessed minor fluctuations, consumer discretionary and technology shares ended higher, creating a positive boost. On the other hand, oil prices declined due to concerns over fuel demand.
Markets Recap And Watchlist
Jerome Powell, the Fed Chair, maintained a hawkish stance in his Senate Banking Committee testimony. However, Wall Street reacted calmly this time, with the S&P 500 and Nasdaq breaking their three-day losing streak.
While there were no surprises in US initial jobless claims, the Conference Board Leading Economic Index showed 14 consecutive months of decline, which might attract some attention. The value sector faced challenges overnight, while megacap tech thrived.
Despite further Fedspeak scheduled, it may be a non-event since the market has become accustomed to a hawkish but data-dependent tone. Watch out for any signs of a soft landing in the upcoming flash PMI figures.
Treasury yields increased, boosting the US dollar but weighing down gold prices, which hit a three-month low.
Asian stocks are expected to have a mixed open amidst significant downside surprises in Japan’s headline inflation. The BoJ may become more wait-and-see in its policy-pivot plans, given the mixed data and downside growth risks.
The focus will be on Singapore’s CPI, as the MAS leans towards a pause in its tightening stance. A downside surprise in moderating inflation may affect the SGD.
Flash PMI Figures
Today, on June 23, 2023, several important Flash Manufacturing and Services PMI releases are expected.
The PMI measures a diffusion index’s level based on responses from purchasing managers in the manufacturing and services sectors. Traders will be hoping for a higher actual than the forecast, which is great for the currency.
Investors should care about the PMI releases because businesses’ prompt responses to market conditions serve as a leading sign of economic health.
Additionally, purchasing managers may have the most up-to-date and pertinent knowledge on how the business views the economy.
If the PMI is above 50.0, it shows that the industry is expanding, while below signifies that it is contracting.
Investors should be interested in the PMI releases as they are a leading indicator of economic health and businesses respond quickly to market conditions.
Moreover, their purchasing managers could provide the most recent and critical insights into the economic outlook of the company.
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