Investors Cautious Ahead of Fed and ECB Later in the Week

Gold has gone into consolidation in the run-up to tomorrow's FOMC decision as traders await the latest views from the central bank in light of recent data and the fallout from the mini-banking crisis. Markets suggest a 25 basis point hike is locked in and while that could arguably prove to be a mistake, it looks the easiest option at this stage.

Bitcoin's Dangerous Fall

Bitcoin closed below its 50-day moving average on Monday. The price stays below that curve and is stuck at $28.0K after rising 1.3% to today. If it can’t quickly surpass it again, Bitcoin’s fall below $27K will pave the way for a move to $22K, where the 200-day passes, which became a turning point in March.

Fed Hike, Then What?

There is a pretty strong consensus that the Fed will hike by a quarter of a point at the next meeting. But what could really throw the markets for a loop is what happens after that. Most traders for the moment expect a pause. But recent data shows that there remains a significant amount of price pressures, which could leave the Fed still signaling that more rate hikes could be coming.

Sunset Market Commentary

The ECB bank lending survey and the EMU April flash CPI were final key input for the ECB Monetary Policy Committee to start deliberations for Thursday’s interest rate decision. In the quarterly Bank Lending Survey EMU banks reported a further substantial net tightening on credit standards especially for loans to firms and for house purchases. Tightening was more than banks anticipated earlier this year.

New Zealand Dollar Higher Ahead of Employment Data

New Zealand’s labour market has remained robust, despite relentless tightening from the Reserve Bank of New Zealand, which has raised rates to 5.25%. We’ll get a look at first-quarter employment numbers later today, with the markets expecting solid numbers. The unemployment rate is projected to come in at 3.5%, a touch above the 3.4% rate in Q4 of 2022. Employment change is expected at 0.4%, following a Q4 read of 0.2%.

First Impressions: NZ Labour Market March Quarter 2023

The New Zealand labour market remains hot, if past its peak. Unemployment held steady at 3.4% and annual wage growth continued to pick up.

A Risky Lopsided US Stock Market Performance

The combined top 8 US stocks (in terms of market capitalization) in the S&P 500 under the FAANG + MNT group; (Meta/Facebook, Apple, Amazon, Netflix, Alphabet/Google, Microsoft, NVIDIA, Tesla) that contributed close to 102% of the 2023 year-to-date return of the S&P 500 as of 28 April.

Fed to Deliver Last Hike Amid New Bank Turmoil

Today's main event is the FOMC meeting where we expect the Fed to deliver their final 25bp hike, which would send the Federal Funds target range to 5.00-5.25%. Going into the meeting, we will also get ADP employment report and ISM services index for April, see Fed preview: One more hike - Cuts still far away, 27 April. This afternoon we also get ADP employment in the US.

Fed Meeting Looming Tonight

Fed chair Powell is expected to raise rates by 25 bps to 5-5.25%, in line with the March dot plot, before most likely announcing a pause in the tightening cycle.

Fed to Hike Rates as US Bank Turmoil Persists

That’s why US politicians now urge Federal Reserve (Fed) Chair Jerome Powell to stop hiking the interest rates. Elizabeth Warren and Bernie Sanders have reportedly written a letter to warn the Fed that the bank turmoil and the cumulative rate hikes leave the US economy ‘more vulnerable to an overreaction from the Fed’.