At Any Rate Global FX and Rates: US moderation vs. tariffs tunes
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Feb 28, 2025 Explore the fascinating tug-of-war between US economic signals and tariff impacts on inflation and the dollar. The hosts discuss how moderating US rates and shifting business sentiment challenge the Federal Reserve's outlook. Delve into market yields and labor dynamics as they shape expectations for future rate cuts. Additionally, examine tariff implications on the Eurozone following Germany's elections, highlighting potential fiscal reforms and their effects on the EUR/USD exchange rate. It's a riveting look at global financial interplay!
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Falling Term Premium
- Term premium in the US has fallen significantly due to statements from the Treasury Secretary.
- These statements indicated an unchanged coupon auction size, stable debt maturity, and a focus on long-term yields over Fed policy.
Balancing Growth and Inflation
- Market pricing suggests more Fed easing than JPMorgan forecasts, despite potential for stronger payroll data.
- Weaker growth and tariff concerns contribute to an extended Fed hold.
Dollar's Complicated Outlook
- Two opposing drivers impact the dollar: renewed tariff discussions and moderating US data.
- This uncertainty benefits low-yielding currencies like the yen, especially given the unclear future of US data and Fed policy.