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DXY bounced off the low of its 101.5 to 103 range. US GDP growth was remarkably resilient at an annualised 2.9% QoQ saar in 4Q22; consensus expected growth to slow faster to 2.6% from 3.2% in 3Q22. S&P 500 rose 1.1% to 4060, extending its rise above 4000. Nasdaq Composite gained more, rising 1.8% to 11512, back around the highs at the start of December. While some investors looked past Intel’s weak earnings and weaker outlook, others worry that the VIX is near its 52-week low.
The US Treasury 2Y and 10Y yields rose to 4.19% and 3.50% respectively. Consensus expects the Fed to raise rates by a smaller 25 bps to 4.5-4.75% at the FOMC meeting on 1 February. Before the blackout period, Fed officials signalled their intentions to lift rates above 5% this year. Today, consensus expects US PCE inflation to slow to 4.4% YoY in December from 4.7% in November, in line with the fall in its CPI counterpart. Inflation expectations, as per the University of Michigan Consumer Survey, are expected to be unchanged in January at 4% for the one-year and 3% over the next 5-10 years. We see the Fed delivering another 25 bps to 4.75-5% in March. Unlike the Bank of Canada this week, we doubt the Fed is ready to signal a pause next week.
Quote of the day
“Politicians are the same all over. They promise to build bridges even when there are no rivers.”
Nikita Khrushchev
26 January in history
Construction started on the Eiffel Tower in 1887.
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