|

S&P 500 Futures, yields lick Fed inflicted wounds ahead of more central bank announcements

  • Markets consolidate Fed induced losses ahead of monetary policy announcements from BoE, SNB.
  • S&P 500 Futures pare the biggest daily loss in two weeks, yields struggle after falling the most in a week.
  • Fears emanating from banking fallouts weigh on sentiment even as Fed marches 0.25% rate hike expectations.
  • Comments from US Treasury Secretary Yellen, doubts over SVB renew banking woes.

Global markets pare recent pessimism during Thursday’s sluggish session as Fed-induced moves need validation from the Bank of England (BoE) and Swiss National Bank (SNB). Above all, the banking turmoil challenges the optimists despite the latest cautious optimism in the market, mainly backed by the US Federal Reserve’s (Fed) dovish hike.

While portraying the mood, S&P 500 Futures print mild gains around 3,980, up 0.25% intraday following the biggest daily slump in two weeks. In doing so, the US stock futures pare the previous day’s U-turn from a 12-day high. That said, the US 10-year and two-year Treasury bond yields stay pressured around 3.47% and 3.96% at the latest, licking their wounds after falling the most in a week.

On Wednesday, the Fed confirmed the market’s expectations of announcing a 0.25% rate hike but failed to convince the policy hawks. The reason could be linked to the statements saying, “Some additional policy firming may be appropriate,” instead of previous remarks like “Ongoing increases in the target range will be appropriate.”

It should be noted that Fed Chair Jerome Powell and US Treasury Secretary Janet Yellen’s comments triggered the market’s pessimism as Fed’s Powell said that officials do not see rate cuts for this year, which in turn allowed breathing space to the greenback bears in the last.

On the other hand, US Treasury Secretary Janet Yellen ruled out considering “blanket insurance” for bank deposits. Recently, Bloomberg also came out with the news suggesting that the Federal Deposit Insurance Corporation (FDIC) is said to delay the bid deadline for a Silicon Valley private bank.

Elsewhere, Citibank CEO Jane Fraser tries to placate market fears while saying, "This is not a credit crisis. This is a situation where it's a few banks," per Bloomberg. It should be noted that multiple central bank officials have also tried their hands to rule out fears of the 2008 crisis earlier but have failed so far. However, their swift reaction to the fallouts of the Silicon Valley Bank (SVB), Signature Bank and Credit Suisse gains applause and push back the odds of the market’s collapse.

Looking ahead, strong inflation data from the UK may allow the BoE to keep its hawkish bias and announce a 0.25% rate hike while the SNB is up for 50 basis points (bps) of rate lift despite the banking turmoil.

Although the hawkish central bank actions may probe the optimists for a bit, any negative surprises, either in the form of dovish rate increases or no rate lifts at all, could bolster the market’s risk-on mood and propel the yields.

Also read: Forex Today: USD drops after the Fed, but shows signs of life

Author

Anil Panchal

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

More from Anil Panchal
Share:

Editor's Picks

AUD/USD consolidates above 0.7000; remains close to monthly top

AUD/USD holds steady above 0.7000 during the Asian session on Friday, trading just below the previous day's monthly low amid diverging forces. A hawkish RBA continues to support the Aussie, while the recent decline in US bond yields keeps the US Dollar depressed near a three-week low. However, oil-driven inflation fears reinforce Fed hike bets, which, along with geopolitical risks, could benefit the safe-haven buck and cap the currency pair.

USD/JPY bounces off one-month low; climbs to 157.00 amid reviving USD demand

USD/JPY rebounds from the 156.00 neighborhood, or a one-month low touched during Friday’s Asian session, with bulls looking to extend momentum beyond 157.00 amid the emergence of some US Dollar buying. Meanwhile, Japan's National CPI rose to a nine-month peak and reaffirmed BoJ rate-hike bets, which could support the Japanese Yen and cap gains for the currency pair.

Gold treads water around $4,000

Gold prices maintain its offered stance in place at the end of the week, hovering around the key $4,000 threshold per troy ounce. The persistent selling bias in the precious metal comes amid decent gains in the US Dollar and an acceptable rebound in US Treasury yields across the curve, all alongside further upside traction in crude oil prices.

Crypto Today: Bitcoin holds the 50-day EMA as Ethereum and XRP face structural resistance

Bitcoin gradually ticks up on Friday, trading above $81,000. The Crypto King has recently defended structural support near $80,000, reinforcing the prevailing bullish outlook. Ethereum similarly edges higher above $2,400, while Ripple trades above $1.32 after testing support around $1.30.

The French bond panic is overdone. Here's what the market is misreading 

France's 10-year government bond yield has climbed above 5%, reigniting fears of a sovereign debt crisis in the Eurozone. With public debt exceeding €3.5 trillion, persistent budget deficits and a fragmented political landscape, investors are increasingly questioning the French government's ability to stabilize its finances.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.