To The Moon

As the market digests the non-farm payrolls report last Friday, the US dollar index $Invesco DB US Dollar Index Bullish Fund(UUP)$ rose by nearly 0.6% on Monday. Institutions predict that the March CPI will drop significantly from 6% to 5.2%. However, the core CPI, which excludes energy and food prices, is expected to grow 5.6% YoY, an increase from the previous month, and could serve as a basis for further rate hikes by the FOMC. Here's what to expect compared to the prior month's reading: 1. What to focus in March CPI? 1) Housing costs The housing costs (rental prices), an important driver of inflation in recent months, may reverse downward. Powell previously stated that housing costs are expected to show a turning point in the second half of the year, but there are no clear signs yet. 2) Services Inflation in the service sector remains challenging. Although the US labor supply and demand tension has eased slightly, the Fed's JOLTS report shows that the number of job seekers for each vacancy has increased slightly, but it is still at a low level in recent years. Nearly one-third of the new non-farm jobs in March were in the service sector, which could keep prices of service products under pressure. 2. Rate hike expectations in May 1) CMEgroup: 25bps in May and rate cut in July According to the lastest data from cmegroup, there are 70% probablity of 25bps rate hike in May. Federal fund rate futures on the CME show that the market currently expects the Fed to raise rates to 5.00%-5.25% in May, but the median rate by year-end will fall to around 4.3%, which is equivalent to two rate cuts. The possibility of a rate cut in July has once again risen to nearly 70%. 2) Bob Schwartz, a senior economist at Oxford Economics: 25bps in May He stated that although this round of rate hikes is nearing the end, Fed is still expected to raise rates by 25 bps in May, as inflation remains far above the 2% target and the labor market remains healthy, with no reason to worry. 3) St. Louis Fed President Bullard: expect terminal rate of 5.50%-5.75% However, Fed officials remain firm. The most hawkish St. Louis Fed President Bullard stated in a recent speech that he hopes the terminal rate will reach 5.50%-5.75%. So far, no Fed official has mentioned the possibility of a rate cut. In summary, the market consensus for rate hike in May is 25bps. However, the rate hike expectation may revise after the release of CPI. Investors need to keep an eye on March CPI. How do you expect March CPI? Will the core CPI climb up? Will CPI continue to drop? Leave your comments to win tiger coins~