Central Bank Bonanza
A quick rundown on the Central Bank meetings ahead
Hello everyone I thought I would share some quick thoughts I have on the rest of this week. I plan on posting another Fixed Income Friday so be on the lookout for that, there’s also a lot more I’m working on as well!
Now onto my thoughts, Wednesday the 26th is FOMC day. From JPM on FOMC possible outcomes:
Hike & Pause 65%- ‘We think you could see the SPX add 25-75bps on the day’
Hike and Continue 33-34% - 'Under this scenario, we could see the S&P 500 fall 50 bps to 1% on the day.'
Hawkish Skip 1% - This is a tail-risk event that would be the Committee following Bostic's advice. Expect a bull steepening to aid equities, weaken the USD, and boost commodities.'
Fed completed in May < 1% - 'Another tail-risk event which would catch virtually all investors off-guard and would presumably remove the near-term bear case for equities. The outcome would be similar to the hawkish skip but of larger magnitude.'
The ECB will release their updated rate statement on Thursday the 27th at 8:15 EST. Here is what ING thinks about the ECB release below.
I was reviewing previous EURUSD reactions to ECB data releases. As shown below in Figure 2 the time around the data release is very volatile as is to be expected. However, the US 10Y (orange) and the EU 10Y (light blue) both seem to bottom out around the same time before we see EURUSD regain some ground. (This chart is for the March 2023 ECB meeting)
Here is a chart from the June ECB meeting below. Yields are a key factor that drive currency prices so this is not super noteworthy. However, if you plan on trading around the time of the ECB meeting be sure to watch how the yields react I certainly will be.
Last but not least we have the BoJ meeting. Again I think it is smart to be monitoring the US yields going into this meeting and after. That is all for now stay on the lookout for Fixed Income Friday and thank you for reading!
DISCLAIMER: We are not Financial Advisors, and all information presented is for educational purposes ONLY. Financial markets can be extremely volatile, as such using good risk management is a must.