EM Market Report Statue of Liberty

Definitely, maybe

Thanim Islam
Thanim Islam 09 March 2023

- Powell stresses no decision has been made

- BoC pauses but ready to pull trigger

- EU growth worse that expected


  • Whilst markets continued to ratchet up March’s rate expectations following Fed Chair Powell’s remarks on Tuesday, he attempted to dampen the markets expectations by stating that ‘no decision’ has been made on speeding up the pace of rate hikes – so, maybe the Fed will raise by 0.50%. As result USD moves were rather muted, with minor deviations from the closing price on Tuesday. Equities however did recover marginally.
  • On the US data front both the higher ADP and JOLTS job openings continued to add to the argument the Fed may have to do more.
  • The BoC (Bank of Canada) held interest rates at 4.5%, as it suggested in its recent commentary that it was prepared to pause in its rate hike cycle. The BoC added that whilst the job market remains very tight and inflation is easing, it is prepared to hike again if needed to quell inflation.
  • In recent months, sentiment about the eurozone economy has been improving to suggest that the eurozone will ‘definitely’ avoid a recession. However, yesterday’s Q4 GDP data suggests that perhaps the economy is actually struggling, with growth revised lower to 0% from 0.1% led by lower household consumption and investment.
  • On the flip side the British Chamber of Commerce predicts that the UK will avoid a recession this year. However, they do not anticipate the economy to recover to pre-pandemic levels until the final quarter of 2024.


Market rates

* Daily move - against G10 rates at 5:00pm, 08.03.23

** Indicative rates - interbank rates at 5:00pm, 08.03.23

Table (46)

Data points

Table (47)


  • GBP – BoE Breedon

  • EUR – ECB Vujcic

Our thoughts

Today's initial jobless claims will indicate the strength of the job market, but as ever it’s tomorrow's nonfarm payroll print and the average hourly earnings which will be key for FX moves. A miss on these numbers and we could see some of Tuesday's exuberance reversed out, as markets book profits on Fed Powell's comments and then prepare themselves for next week's inflation numbers.

Chart of the day

The hawkish testimony from Fed Powell this week has seen markets re-price rate expectations higher, causing front-end treasury yields to accelerate higher - in turn this has caused the US 2-10 yield curve to invert further, prompting continued fears of an impending recession.

What does this mean for markets? As ever in times of fear, markets will tend to flock to safety, and given the relative yield attraction, the narrative continues to build for the US dollar to gain.

09032023 cotdSource: Bloomberg Finance L.P.

Have a great day.