ECB Hikes Key Rate As Expected

CURRENCY FUTURES

The European Central Bank raised its key interest rate by 25 basis points at its policy meeting today as expected, indicating a slowing pace of policy tightening. Borrowing costs hit the highest level since July 2008, following seven consecutive rate increases. The ECB hinted that more rate hikes are coming.

Net mortgage approvals for house purchases in the U.K were 52,000 in March 2023, which is up from 44,100 in the previous month and surpassing market expectations of 46,250.

U.K. economists expect just one more 25 basis point interest rate hike from the Bank of England on May 11 even though inflation remains in double digits.

Australia’s trade surplus grew to a nine-month high in March. Australia’s trade balance was at its highest level since a record high of A$17.13B was hit in June 2022.

Longer term, interest rate differentials suggest lower prices for the U.S. dollar and higher prices for the euro currency.

STOCK INDEX FUTURES

Stock index futures declined yesterday afternoon with follow-through today due to renewed concerns about the banking system.

Jobless claims in the week ended April 29 increased to 242,000 when 238,000 were expected.

First quarter nonfarm productivity on an annualized basis declined 2.7% when unchanged was anticipated, and unit labor cost on an annualized basis increased 6.3% when up 3.9% was predicted.

INTEREST RATE MARKET FUTURES

Yesterday the Federal Open Market Committee hiked its fed funds rate by 25 basis points to a 16-year high of 5.00%-5.25% as expected.

Most likely the FOMC will keeps its fed funds rate unchanged at its June 14 policy meeting.

In light of renewed concerns about the banking system, flight to quality buying is supporting most futures.

The technicals and fundamentals remain supportive.

 

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