FOREX Fundamental analysis for EURUSD on March 8, 2023
Jerome Powell's overly "hawkish" rhetoric brought down financial markets and sent EURUSD to a two-month low. The head of Fed said in his speech to the Congress that strong economic data will allow the regulator to raise rates higher than it was expected before. Moreover, the Fed is planning to increase the speed of monetary restriction.
The futures market rewrote the maximum rate from 5.1% to 5.6%. Goldman Sachs raised the peak federal funds rate to 5.75% and Black Rock raised it to 6.0%. Naturally, the likelihood that the FOMC will raise rates by 50 basis points at once in March has risen sharply after the Central Banker's speech. Derivatives are pricing in a two-to-three chance, though it was a one-to-three chance this morning. The most desperate investors are starting to calculate the probability of a 75 basis point monetary cut.
Federal funds rate hikes
The 2-year bond yield curve jumped to 2007 highs, dropping in value and with it the yield curve to 1981 lows.
Dynamics of the yield curve and U.S. bond rates
The Fed is returning to the idea of fighting inflation despite the sagging economy. Jerome Powell gave the dollar back the lead in forex trading, but the further course of the regulator's monetary policy will of course depend on external data, and if the US labor market report disappoints the monetary authorities, EUR/USD will quickly return to the 1.0575-1.0675 range. In the meantime, the advantage is in the sales