Since the second half of last week, the market has been turbulent due to risk alertness. The bankruptcies of Silicon Valley Bank, Signature Bank, etc. All of them are banks with a fairly skewed customer base, but there seems to be a view that the rapid rise in US interest rates has caused adverse effects. Along with the decline in US bond yields and falling stock prices, expectations for future US interest rate hikes are rapidly receding. In the money market, the next FOMC meeting in March is expected to keep the rate unchanged by about 25% and raise the rate by 25bp to about 75%. In February, a series of strong U.S. economic data also led to speculation of a 50 basis point rate hike. Things are changing all the time.
It should be noted that the market environment ahead of the announcement is different. Even after the strong US employment statistics were announced last time, the market vector was tilted in the direction of a large US interest rate hike. This time, however, against the backdrop of the US financial instability as described above, there are prevailing speculations that the US interest rate hike will be small and that it will be postponed.
The impact on the US consumer price index results is likely to be different. In the event that inflation slows down more than expected, the vector will coincide with current market conditions, and the dollar selling reaction is expected to intensify considerably. Conversely, if inflation is higher than expected, an initial reaction of dollar buying is expected. However, it seems necessary to closely monitor US bond yield trends to determine its sustainability.
If inflation slows down, the US dollar is expected to sell off significantly. If the US dollar sells, the pair will consider where to enter.