A widely expected pause in the Federal Reserve’s brutal rate rise campaign next week is clearly helping the mood, with futures now showing only a one-in-five chance of another tightening on June 14.
News of another sharp drop in the New York Fed’s index of global supply chain pressures in May helps that cause.
And despite lacing updated world forecasts with caution and some question marks over 2024, the Organisation for Economic Cooperation and Development and the World Bank both lifted their 2023 global growth forecasts over the past 24 hours.
What’s more, the OECD saw Fed rates peaking after just one more hike to the 5.25-5.5% range and “modest” cuts next year.
While dire Chinese export numbers for May might question those growth scenarios, they also cut across thoughts of a fresh inflation spur from the country’s re-opening this year.
Oil prices remain lower on the week despite new Saudi output cut plans and year-on-year prices are still falling at 36%.
The Fed’s April report credit conditions will be watched closely later for any more signs the banking stress of the previous month crimped lending.
Wednesday sees another test of the central bank ‘pause’ thesis, however, with markets putting 50-50 chance on the Bank of Canada resuming its rate hikes after a four-month hiatus. The Canadian dollar pushed higher ahead of the policy decision.
Elsewhere, the withering slide of Turkey’s lira since last month’s re-election of President Tayyip Erdogan went up several gears on Wednesday as it plunged a further 7% – almost doubling losses seen since the vote.
The weakening comes as heavy intervention to artificially prop up the currency before the election – which further drained reserve coffers and central bank IOUs – is expected to be abandoned by new finance minister Mehmet Simsek.
Crypto tokens such as bitcoin steadied after hitting 3-month lows on Tuesday when U.S. regulators expanded their crackdown on crypto exchanges to the Coinbase platform, the second lawsuit in two days against a major crypto exchange.
More broadly, U.S. stock futures, European and Asia bourses were steady to lower on Wednesday. The dollar was a touch lower and bonds were steady.
