Central Bank Watch: Fed Speeches And Interest Rate Expectations Update

April 20 – Powell, in a written response to Senator Rick Scott (R-FL) obtained by Reuters, downplays inflation threats, saying the Fed does not “seek inflation that substantially exceeds 2 percent, nor do we seek inflation above 2 percent for a prolonged period.”

FEDERAL RESERVE INTEREST RATE EXPECTATIONS (APRIL 27, 2021) (TABLE 1)

Central Bank Watch: Fed Speeches, Interest Rate Expectations Update

Fed policymakers have been disciplined with their messaging in recent weeks, so disciplined that rates markets haven’t moved in the interim period since our prior Fed edition of Central Bank Watch. Like on April 8 and April 22, Fed funds futures are still pricing in a 91% chance of no change in Fed rates through January 2022.

IG CLIENT SENTIMENT INDEX: USD/JPY RATE FORECAST (APRIL 27, 2021) (CHART 1)

Central Bank Watch: Fed Speeches, Interest Rate Expectations Update

USD/JPY: Retail trader data shows 59.31% of traders are net-long with the ratio of traders long to short at 1.46 to 1. The number of traders net-long is 22.49% higher than yesterday and 36.32% higher from last week, while the number of traders net-short is 10.55% lower than yesterday and 8.04% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/JPY prices may continue to fall.

Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USD/JPY-bearish contrarian trading bias.

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