The Fed delivered the expected 25bps hike this week and left the door open for a rate pause. This was entirely expected and puts the focus firmly on NFP data on Friday and inflation data next Wednesday as the Fed move to a meeting-by-meeting basis. A weak jobs number on Friday could be the catalyst that sends gold to fresh all-time highs. With the seasonal weak summer months ahead for stocks bond investing is once again gaining attraction amongst investors this week.

Other key events from the past week

  • USD: Fed Rate Decision, May 3: The Fed was expected to hike by 25 bps this week and it did. It also gave an indication that it may be able to pause rates now and has moved to a meeting-by-meeting basis.
  • Bank news: JPMorgan takes over First Republic, May 1: Bank worries took a step back as the week started with news that First Republic is taken over by JPMorgan. However, US regional lenders PacWest fell 28% & Western Alliance fell 15% on Tuesday with both losing around $5 billion in market value this year.
  • USD: Jobs drop, May 2: US JOLT’s job openings fell this week to 9.59M from 9.775M expected which is a further sign that the US economy is slowing. Will that show up in Friday’s NFP data? The worsening US economic outlook is starting to turn investors from equity markets into bond markets.

Key events for the coming week

  • USD: US inflation data, May 10: The Federal Reserve meets next week and the key focus is on whether it sees the headline and core inflation prints falling. The last thing the Fed will want to see is either or both of these inflation metrics tick-ing higher. A big miss and gold could see fresh highs next week.
  • Seasonal Insights: Is Apple’s dip worth buying?
  • GBP: UK Rate Decision, May 11: Short-term interest rate markets are pricing in a 90+% chance of a 25bps rate hike at the time of writing and a terminal rate of around 4.85%. Will the BoE prioritise fighting double-digit inflation as the markets are expecting? Will that send the EURGBP lower?

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