Most of the data on the US economy this week continued to be a pleasant surprise, reinforcing the view that despite the significant tightening of monetary policy by the Federal Reserve System (Fed) and the tightening of credit rules by US banks, the path of recovery continues, further reducing concerns about a possible recession in the near future (although the market continues to count on a fairly high probability, about 65%, of a recession in the next 12 months).
Notably, the PMI Composite in May strengthened to its highest level since April 2022 (54.5 vs. 53.6 the previous month), new home sales reached a 13-month high in April (683,000) thanks to a slight drop in mortgage rates in recent weeks. , while the number of new jobless claims rose less than expected last week (+4,000 to 229,000), and the corresponding figures for the previous two weeks were revised down, which suggests that the labor market is weakening, but at a slower pace than initial data indicated. . Encouraged by new positive economic data, continued “aggressive” statements from Fed officials and increased optimism about an agreement to raise the government debt limit in the coming days, investors are now almost certain that the US interest rate hike cycle is not over yet. Contrary to an assessment made in early May, when the last Fed monetary policy meeting was held, that US interest rates were at the ceiling level and the Bank will begin their first cut in the coming months, the futures market now estimates the probability of about 40% the possibility of a new increase by 25 m.p. at the next meeting on June 14, while at the meeting on July 26 a similar increase is almost guaranteed, with the total projected rate cut by the end of the year limited to just 35 basis points. O.
Amid heightened expectations of even higher interest rates from the Fed, US and German government bonds continued to come under heavy pressure, while the dollar remained in an uptrend with EUR/USD. retreat below the 1.08 area.
* Department of Financial Analysis and Research of International Capital Markets of Eurobank.
Source: Kathimerini
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