Markets trim Fed rate cut expectations amid high US CPI
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Markets have reduced their expectations for a rate cut by the Federal Reserve due to high US CPI. The US March CPI print surprised to the upside with a 0.4% m/m increase in both headline and core inflation. The market reaction was strong, with expectations of rate cuts for the year being scaled back to 2. The 10-year yield gained 18bp and the US dollar gained 1% against most G-10 currencies. Asian equity markets tumbled following the CPI print, with the Nikkei down 0.8% and the MSCI index for Asia-Pacific losing 0.7%. The ECB is expected to confirm its current narrative and deliver a rate cut in June. In Sweden, inflation expectations are expected to be confirmed at around 2.0% on all horizons. The US PPI data and Fedspeak are also awaited.
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