The hotter-than-expected consumer inflation data for March reported last week has the implied forecast via Fed funds futures indicating that interest rate cuts are unlikely in the months ahead. The the implied probability is heavily skewed toward no rate cuts for the next two FOMC meetings in May and June. For the September policy meeting, the current forecast is too close to call and is a coin toss in terms of guesstimating.
β οΈ Trading tips: looking at QQQ puts under 429.86 and calls above 431.91 on Tuesday. The housing data at 8:30am, the rising Middle East tension and Jerome Powell will speak at 1:15 pm to move the market.
Retrace before another plunge?
Two key questions hang over the outlook for rate cuts. First, is the hawkish reaction to last week's consumer inflation data for April excessive? Meanwhile, how does the Iranian missile attack on Israel alter the calculus? If the attack marks the start of a wider Middle East war, will it trigger a run for safety in global markets that lifts demand for Treasuries (and reduce yields), if only temporarily?
For the moment, the world is closely monitoring how and when Israel will react. "Israel can't allow such a large attack over Israel without some kind of response, be it small or large," an Israeli official in the prime minister's office tells NBC News. "It's up to the war Cabinet to decide now."
Make peace, not war
Top Israeli military officials reiterated that the country has no choice but to answer Iranβs weekend drone and missile attack, even as European and US officials boosted calls for Israel to avoid tit-for-tat escalation that could provoke a wider war.
In other security news, the US, Japan and South Korea on Wednesday will hold a meeting of financial chiefs in Washington, part of the effort to counter geopolitical and economic threats. US Treasury Secretary Janet Yellen, Japanese Finance Minister Shunichi Suzuki and South Korean Finance Minister Choi Sang-mok are expected to discuss sanctions against Russia and North Korea, as well as support for Pacific island nations.
Economic news this week
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