In The US, Traders Have Trimmed Down Rate Cut Expectation In Mar’24

Sensex is trading higher today

Aditi Gupta, 

Economist,

Bank of Baroda

FinTech BizNews Service   

Mumbai, January 23, 2024: Bank of Japan left its policy rate unchanged, in line with market expectations. Reports of a nearly 2tn yuan stimulus package in China to stabilise the stock markets also buoyed investor sentiments. This has led to a rally in Asian stocks, with Japan’s Nikkei trading near a 34-year high today. US stocks too continued their bull-run with the S&P 500 and Dow Jones both ending at a fresh record-high. Focus this week remains on flash PMIs of major economies, US Q4GDP and PCE report and consumer confidence index of UK and Germany. Apart from this, investors will also keep a keen eye on ECB policy decision due later in the week. While it is widely expected to keep rates on pause, investors will await cues from ECB Chair’s statement to assess future trajectory of rates.

• Global markets ended mixed. Stocks in US and Europe inched up as policy decision of major central banks are closely watched. In the US, traders have trimmed down expectation of rate cut in Mar’24 as per CME Fed Watch tool (probability of 42.4% from 76.9% a week ago). Asian stocks broadly ended lower. However, news of stimulus from Chinese authorities to stabilise the market has buoyed Asian stocks today. Sensex is also trading higher. 
• Global currencies traded in thin ranges as investors assessed future rate path. DXY, GBP and JPY ended largely unchanged. On the other hand, EUR depreciated a tad ahead of ECB meeting. INR appreciated by 0.1%, in the last trading session. However, it opened weaker today, while other Asian currencies are trading mixed.
• Except India, global yields closed lower. Germany’s 10Y yield fell by 5bps, as ECB decision and major macro releases such as retail sales and GDP are awaited. 10Y yields in both US and UK fell by 2bps each. In UK, markets await public sector borrowing data. India’s 10Y yield closed flat and is trading a tad lower at 7.17% today.

(The views expressed in this research note are personal views of the author(s) and do not necessarily reflect the views of Bank of Baroda. Nothing contained in this publication shall constitute or be deemed to constitute an offer to sell/ purchase or as an invitation or solicitation to do so for any securities of any entity.)