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2023-05-03 08:04:03 Today will be the Fed's interest rate decision. A month ago market expectations for the Fed decision at the May 3 meeting were 50/50 (leave it at 5% or raise it by 0.25 p.p.), now 90% in favor of a 0.25 p.p. rate hike.

If the March Fed meeting was in the midst of severe panic and uncertainty in the market related to the banking crisis. Now conditions have changed.

Once again, too strong macroeconomic data, high background inflation and a market that is trying to continue the "overhang" as company capitalization excluding the financial sector and the infotech is a negligible distance (a few percent) from the historical high set in January 2022. At the same time, the European market has already stormed through the highs.

The debt market has normalized and there is a very strong skew on the far end of the yield curve, where yields on bonds with maturities greater than 5 years have sagged in yields (increased in price).

This is due to both high demand for bonds after a record-breaking overflow of liquidity from deposits (most of it was concentrated precisely in bonds), and expectations of the Central Bank rate reduction soon (and quite intensive reduction).

As a result, for instance, 10-year bonds lost 0.6 p. p. of yield from 4-4.1% in early March to 3.4% at present. The yield curve has become highly inverted, with the difference between short-term and long-term bonds exceeding 1.6 p.p., the largest gap in the entire period of available statistics on treasuries.

The last time something similar (a 1.5 p.p. gap between 3-month notes and 10-year treasuries) was in the 80s, in 1989 the spread was 0.2 p.p., in the early noughties it was 0.9 p.p., and in Q1 2007 it was 0.5 p.p.

On the one hand, a decrease in the interest rates on bonds with the maturity of more than 3 to 5 years is positive, as it relieves the expenditures on interest payments on the debt.

On the other hand, previously in all cases the inversion of the yield curve (long-term bonds are lower than short-term bonds) coincided with the beginning of the economic crisis. The logic is understandable, since the inversion of the yield curve suggests market expectations for a lower rate, and this occurs when there are incipient imbalances in the system, both in the economy and in the financial market.

Going back to the Fed's decision following the May 3 meeting. The factors are forming in such a way that maneuvering space is greatly narrowed. Taking into account the abovementioned, we should add that the market expectations are unambiguously in favor of the rate increase, and the Fed has never "cheated" the market.

Although they tried to spin the banking crisis again a couple of days before the meeting, but it came out unconvincing. In the hierarchy of priorities, the inflation factor is dominating at the moment, so the Fed will have to raise the rates, even though the Fed was not going to raise the rates not only now, but also in March. Circumstances are such that they had to.

Inflation is too high and there is no room for the Fed to retreat, or else confidence will be undermined with far-reaching, devastating consequences.

This should be the last Fed rate hike, probably not just this year, but for many years. There is pain and disappointment ahead. The market is betting that the first, rate cut will not be until September 20 to 5%, then a 0.25 p.p. cut at each meeting and no more than 4.5% in December 2023 - the same amount that was in December 2022.

In March 2023, expectations for December were 5-5.75%, i.e., the banking crisis removed 1 p.p. But the market could be wrong this time too. Trigger should come sooner, which will require the Fed to act urgently as the banking crisis is always followed by a non-financial sector crisis with an increase in toxic debt (rising cost of debt service + crisis of confidence with inability to place) and a collapse in investment.

Due to inertia, a recession could come as early as July, but will there be a massive crisis?

Best Regards
Jared Winston
@develonbot Ochish/sharhlash

2023-05-02 08:31:52 The U.S. recognized the risk of default by June 1 because of the huge debts. Joe Biden is calling an emergency meeting with congressional leaders amid this risk.

The U.S. government could run out of emergency measures due to reaching the national debt ceiling by June 1, U.S. Treasury chief Janet Yellen told Congress. She is confident of the economic consequences of inaction, warning that it could cause serious hardship for American families and damage "U.S. global leadership." Ochish/sharhlash

2023-05-01 18:23:25 Fedwatch: markets lay 91% chance of a 0.25% Fed rate hike in May Ochish/sharhlash

2023-05-01 07:47:27 Key events calendar for current week GMT time:

Monday 1 May
Germany - No auction - Labor Day
Moscow exchange - No trading - Labor Day
China - No trades - Labor Day
Japan - Manufacturing PMI (Apr) - 00:30
Canada - Manufacturing PMI (Apr) - 13:30
USA - Manufacturing PMI (Apr) - 13:45
USA - Construction Spending (March) - 14:00
USA - ISM Manufacturing PMI (Apr) - 14:00

Tuesday 2 May
China - No trades - Labor Day
Australia - Interest rate decision - 04:30
Russia - Manufacturing PMI (Apr) - 06:00
Switzerland - Manufacturing PMI (Apr) - 07:00
Germany - Manufacturing PMI (Apr) - 07:55
EU - Manufacturing PMI (Apr) - 08:00
UK - Manufacturing PMI (Apr) - 08:30
EU - CPI Consumer Inflation (Apr-pre) - 09:00
Australia - Speech by the head of the Central Bank of Australia - 11:20
Brazil - Manufacturing PMI (Apr) - 13:00
USA - Factory Orders (March) - 14:00
USA - API weekly crude oil inventories - 20:30
New Zealand - Speech by the head of the Central Bank of New Zealand - 23:00

Wednesday 3 May
China - No trades - Labor Day
Japan - No bidding - Constitution Day
Türkiye - CPI Consumer Inflation (Apr) - 07:00
Russia - Central Bank will announce the volume of currency sales for May - 09:00
EU - Unemployment rate (March) - 09:00
USA - ADP Nonfarm Employment (Apr) - 12:15
USA - Composite/Services PMI (Apr) - 13:45
USA - ISM Non-Manufacturing PMI (Apr) - 14:00
USA - Crude Oil Reserves - 14:30
USA - FOMC Statement - 18:00
USA - Fed Rate Decision - 18:00
USA - FOMC Press Conference - 18:30

Thursday 4 May
Japan - No bidding - Green Day
Russia - Services PMI (Apr) - 06:00
Germany - Composite/Services PMI (Apr) - 07:55
EU - Composite/Services PMI (Apr) - 08:00
UK - Composite/Services PMI (Apr) - 08:30
EU - Prominflation PPI (March) - 09:00
EU - Interest rate decision - 12:15
USA - Initial Jobless Claims - 12:30
USA - Balance of Trade (March) - 12:30
EU - ECB Press Conference - 12:45
Canada - Manufacturing PMI (Apr) - 14:00
EU - Speech by the head of the ECB - 14:15
Canada - Speech by the head of the Central Bank of Canada - 16:50
USA - Fed Balance Volume - 20:30

Friday 5 May
Japan - No auction - World Children's Day
China - Caixin Services PMI (Apr) - 01:45
Switzerland - CPI Consumer Inflation (Apr) - 06:30
Switzerland - Speech by the head of the Central Bank - 09:00
USA - Nonfarm Payrolls (Apr) - 12:30
USA - Unemployment Rate (Apr) - 12:30
USA - Number of active rigs from Baker Hughes - 17:00 Ochish/sharhlash

2023-04-28 08:18:58 ELM EA Pro Trading Results

Total Gain: +209.95%
Profit: $118,136.07

Deposits: $180,000.00
Withdrawals: $178,521.00
Balance: $119,615.07

There were many good trades on my account this week

Detailed Statement

Jared Winston
@develonbot Ochish/sharhlash

2023-04-17 17:17:28 Today is not a day rich in significant economic data. The most important one is the Empire State Manufacturing index, with its April estimate well above expectations. The New York Fed index rose to 10.8 from -24.6 a month earlier, though only a slight increase to -17.7 was expected.

Readings above 0 indicate an increase in activity and current levels are the highest since last July.

While this indicator has been quite volatile in recent years, in a quiet market its sharp improvement over expectations has supported expectations for further rate hikes.

In early U.S. trading, the interest rate futures market noted an 87% chance of a 25 basis point hike, up from 78% last Friday and 72% the week before. In turn, this reassessment of the outlook supports demand for the dollar, which is benefiting from higher rates.

Best regards
Jared Winston Ochish/sharhlash

2023-04-13 17:12:23 ELM EA Pro Trading Results

Total Gain: +174.93%
Profit: $104,620.50

Deposits: $180,000.00
Withdrawals: $78,521.00
Balance: $206,099.50

There are almost no trades in the last week, so I have not published the results from my account.

We continue to wait and see, I think there are many more interesting situations in the markets this year.

Detailed Statement Ochish/sharhlash

2023-04-13 16:41:11 chief at the Central Bank of Japan: "I told the G7 representatives that the Central Bank of Japan will continue to ease monetary policy. Ochish/sharhlash

2023-04-13 15:39:58 The maximum rate expected in the market again from the Fed. Over 5%.
The Fed will most likely raise the rate in May. They'll say they may raise it again if anything. And then they'll go into wait-and-see mode. Ochish/sharhlash

2023-04-13 15:35:44 U.S. jobless claims are again above analysts' expectations.
The producer price index is declining. Ochish/sharhlash