The “hawkish hold” scenario has lost a little credence though: Looking to July, markets currently price a 39% probability for no change at that meeting too, up from only 26% odds a day earlier, according to the CME Group’s FedWatch Tool.
Speculation of a less aggressive Fed is feeding appetite for risk assets. Asian stocks have followed Wall Street higher – with Japan’s Nikkei punching to a fresh 33-year peak – paving the way for gains in Europe as well.
The dollar continues to sag, languishing near multi-week lows to the euro and sterling.
The British currency has the additional tailwind from continued strong wage growth in data yesterday, boosting bets for continued tightening ahead of the Bank of England’s policy decision next week. Today, economists predict slightly better GDP growth in April from the previous month, but a decline in industrial output.
There’s also euro-area industrial production for April, a day ahead of the ECB decision, with a quarter-point hike taken as a given, and the only point of contention whether the next one comes in July or September.
/cloudfront-us-east-2.images.arcpublishing.com/reuters/ICCBBUCJHJNBHMLVRXD6M5LJWY.jpg "A hawkish skip or a dovish pause? 32")
