The US economy now meets the barest technical definition of a recession, and Federal Reserve hikes are now fully dependent on inflation and labour data meeting to meeting.
This realisation brought down yields in the US sharply and they in turn knocked down the dollar against nearly every major currency worldwide, save the euro, which continues to suffer from the slow but steady reduction in the flow of Russian gas.
Now that both the Federal Reserve and the ECB have effectively removed forward guidance, central bank hikes are more data dependent than ever. Therefore, focus will be on Friday’s labour report out of the US. So far, the jobs market there has remained remarkably resilient to the economic slowdown. The Bank of England meeting on Thursday is expected to deliver a 50 basis point rate increase, and it too is likely to downgrade or remove altogether any explicit forward guidance on rates.
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