Investors digest hawkish Federal Reserve bets

The market participants have ignored rising bets for a consecutive 25 basis points (bps) rate hike from the Federal Reserve and have started pouring funds into the risk-sensitive assets. Investors seem assured about the continuation of rate hikes from the Federal Reserve as the US labor market has not shown meaningful signs of slowdown despite higher rates and tight credit conditions.

The US Dollar remained in a negative trajectory in the Asian session after less-hawkish commentary from New York Fed Bank president John C. Williams. Federal Reserve Williams stated that inflation will be around 3.75% this year, the growth rate will be less than 1% and the Unemployment Rate will gradually rise to 4-4.5%. This indicates that inflation will soften ahead and hopes for rate cuts will be alive. On banking turmoil, Fed Williams believes that higher rates by the Federal Reserve were not the cause of recent banking stress. This has reduced fears of further banking turmoil if the hawkish monetary policy from the Federal Reserve is not responsible for banking collapse.

US Inflation to remain a key trigger ahead

Investors are very much curious about the release of the US CPI data as it will be the last inflation figures before the interest rate decision from the Federal Reserve, which will be announced in the first week of May. Therefore, Wednesday’s US Inflation data carries a higher value. Analysts at TD Securities expect the headline inflation to rise by 0.1% in March, and the core CPI by 0.4%. They see the CPI slowing to 3.6% by the fourth quarter.

March’s US headline inflation is expected to be softened by consistently lower oil prices, which had eventually provided gas to end consumers at more affordable prices. While core inflation could be spurted due to the higher labor cost index, which has filled households with ample funds for disposal.