The Weekly Bottom Line: Housing Falls as the Fed Blackout Period Begins

As earnings season picked up pace this week, markets were closely attuned to the first quarter performance of U.S. companies. However, the net result on equity markets was muted, as results that were on aggregate moderately positive were partially overshadowed by the downbeat outlook for demand amid the expected economic slowdown later this year. As of the time of writing, the S&P 500 is down 0.5% on the week while the ten-year Treasury yield is up 5 basis-points (bps) to 3.57%.

Week Ahead – Avalanche of Data Releases to Keep Traders Busy

There are no major central bank decisions scheduled for next week, but that doesn’t mean markets will be quiet as there’s a ton of data releases that can fuel volatility. The highlight will be China’s economic growth, which will reveal exactly how powerful the reopening boost was. Meanwhile in Europe, the latest business surveys could decide whether the euro’s rally still has some miles left in the tank.

Weekly Focus

In the absence of further banking turmoil, it has been relatively calm waters in financial markets over the last two weeks. VIX volatility has traded at fairly low levels and yields have started to edge higher again, as focus turns away from risk of a banking crisis and back to data. Back in risk-on mode we have seen further USD weakening also supported by soft US data releases.

The Weekly Bottom Line: Bank of Canada Versus Markets

The spotlight was on the Bank of Canada's (BoC) interest rate decision this week. As was widely expected, the Bank left the policy rate unchanged at 4.50% for a second straight decision. However, where markets and the Bank differ is how long this policy pause will last.

Weekly Economic & Financial Commentary: FOMC on Path for 25 bps Rate Hike on May 3

With volatility in financial markets subsiding recently and with inflationary pressures remaining elevated, we look for the FOMC to hike rates by another 25 bps at its May 3 meeting. But we also think May 3 will mark the end of the tightening cycle that has been in place since last March.

Forex and Cryptocurrency Forecast

The DXY dollar index updated a 12-month low last week, and EUR/USD, respectively, rose to a maximum (1.1075) since April 04, 2022. The US currency has been falling for the fifth week in a row: the longest series since summer 2020.

Weak Spending Won't Derail Another Fed Hike

Fed Governor Christopher Waller on Friday said he favoured more monetary tightening unless credit conditions tightened more than expected. The market discounts almost a full 25bp rate hike at the upcoming FOMC meeting in May.

US Inflation Expectations Jump, as Earnings Season Kicks Off

Despite the softer-than-expected inflation data released earlier last week, US inflation expectations shocked investors at last Friday’s release; the 1-year expectation jumped from 3.6% to 4.6% due to the surprise surge in energy prices. The expectation was a further easing to 3.5%.

AUD/USD – Australian Dollar Takes Traders for a Wild Ride

The Australian dollar has steadied on Monday, trading just above the 0.67 level. We could see further movement from the Aussie early on Tuesday, as China releases GDP.

Crypto Market Pauses after the Rise

The crypto market has gained around 7.2% in the last seven days to $1.268 trillion. The crypto market is recovering, like climbing the stairs, and is now consolidating at the same level it consolidated in May-June last year. To get to the next floor, with a market cap of $1.7 trillion, would require a jump of 34% – quite a climb, requiring a shift in market sentiment.