DXY… We see a high pricing in the dollar index, which is based on an excessive expectation by some segments. While the effect of this move coming from a Fed production is huge, it would not be wrong to say that the risks surrounding peer currencies also have a multiplier effect. Factors such as policy and yield differences and geopolitical pressures seem to have heavily triggered a trend towards the dollar from other currencies.
Comparison of DXY and European currencies… Source: Bloomberg
Inflation expectations, yield differentials… The phenomenon of excess in inflation expectations was reflected together with the updated trend of the latest price factors. In this context, we observe that yields in the US are increasing rapidly and stabilizing slightly in the current level. However, interest rates are higher in every term than at the end of last year. The risks and perspective differences of ECB and BOJ policies will keep the yield gap open. While the rise in the bond market regressed the negative yield bond stock on a global basis, we still watch the US 10-year bond yield at the level of 2.80%.
US 5y5y inflation swaps and 5-year CPI B/E comparison… Source: Bloomberg
Conclusion? The FOMC will announce its plans at the end of its May 3-4 meeting. In short, the Committee is expected to increase the federal funds rate target range by 50 basis points and announce its plan to begin balance sheet reduction in June. After the process that started with Powell's bringing a series of 50 basis points beyond 50 basis points to the agenda for May, the Fed's rate hike expectations began to be expressed with 75 basis points. How inflation risks will be stratified and how excessively it will be intervened will be decisive for Powell to become a Volcker. Despite that; In order for the Fed's long-term sustainable dynamics to be in balance, there is a need for an inflation that is close to the target path after the tightening policy and the secondary effects are brought under control and after the external effects are eliminated, so that the end of the tightening is not a recession.
Kaynak Tera Yatırım
Hibya Haber Ajansı