Fed doves become worries into next week’s FOMC [Video]

Yesterday’s mix of economic data – which pointed at higher-than-expected inflation and lower-than-expected spending in the US – finally broke the Federal Reserve (Fed) doves’ and the equity bulls’ back for at least a day. US yields and the USD jumped, equities fell.

All eyes are on next week’s FOMC meeting. The Fed will update its dot plot having seen a two-month jump in inflation, robust jobs data, a relatively strong GDP print and healthy earnings. There is a chance that we see the median forecast show no more than two rate cuts penciled in by the Fed members for the year – instead of three plotted at December’s dot plot. The EURUSD fell as the European Central Bank (ECB) members continued to voice support for rate cuts in the euro area, the USDJPY rebounded despite wages negotiations looking favourable for Bank of Japan (BoJ) hike.

Elsewhere, US crude advanced to $81pb level after Ukraine damaged 12% of Russia’s refining capacity with drone attacks and IEA’s new forecast of supply deficit this year.