Dear Clients,
Below is this week’s market forecast from our trade desk here at LTI.”Payroll surprise supports ‘higher for longer’ expectation” – We think the FOMC is setting the stage for a pause in rate hikes, but given the unexpectedly strong January employment data, we think the economy will stay too tight for the Fed to lower interest rates in 2023.
Nomura have adjusted their 2023 USD forecasts stating “Overall, we believe the FOMC meeting adds support to our monetary policy outlook of another 25bp rate hike in March, to a terminal rate of 4.75-5.00%. However, after the upside surprise in the January employment report, we revised our economic outlook and now expect a shallower recession of just two negative real GDP growth in Q1 and Q2 this year versus our prior expectation of four quarters of negative real GDP growth spanning the entirety of 2023.
Our trade desk looks towards a DXY appreciation into 104.000, before any readjustments to our FX positioning. This week, we’ll look to add onto our dollar bullish positions from last week. Having taken advantage of a higher than expected NFP read Friday. The S&P500 continues to look attractive for shorts into 3600. Upcoming releases of significant importance include;- (AUD) RBA rate statement.- (USD) FED Chair Powell speaks.- (GBP) GDP m/m.- (CAD) Unemployment rate.
We wish you all a safe week, in and out of the markets.
Kind Regards.