Fed eyes 50 basis point hikes

Today's news headlines:

‘Fed officials raised possibility of ‘restrictive’ policy to fight inflation’. In the minutes of the latest Federal Open Market Committee meeting in May, the desire to pursue a ‘restrictive’ policy stance to curb inflation was emphasised. Hikes of 50 basis points at the next few meetings were supported as the central bank aims to return to a neutral policy rate. Although there’s a consensus for a tighter monetary policy path, the central bank is still wary of growth slowing in the latter half of the year, leaving the door open for a re-assessment of policy direction. (Financial Times)

‘Government bond markets rally as growth fears overshadow inflation’. The growth outlook for most major economies is at the forefront of investors’ minds. Government bonds have staged a modest turnaround as investors look to safe-haven assets following aggressive sell-offs in the equity market, with the yield on the US 10-year Treasury bond falling to 2.72% from highs of 3.20% just a few weeks ago. Corporate earnings surprises to the downside as a result of rising price pressures have become more common. Snapchat issued a profit warning at the start of the week, sending its stock falling as much as 43%. (Financial Times)


Asian markets were mixed overnight as the Federal Reserve hinted at a possible change in policy direction. European shares are broadly higher today, while the US Dollar Index is trading flat this morning. Brent crude is up 40 basis points in early trade.


Canadian Retail and Core Retail Sales m/m: 1:30PM
US preliminary Gross Domestic Product q/q: 1:30PM
US Unemployment Claims: 1:30PM
US Pending Home Sales m/m: 3:00PM
German and French Bank Holiday: All day

Interbank rates:

GBP/USD – 1.2592
GBP/EUR – 1.1779
EUR/USD – 1.0690
USD/CAD – 1.2815

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