Slightly risk-on
The dollar has been trading under pressure for the day, with most currencies posting gains. The markets are starting to price rate cuts in the US more aggressively. This can possibly cause the US treasury yield curve continues to remain deeply inverted, an early indication that a US recession is looming. The market expects the Fed to not hike rates again and to start cutting interest rates in the second half of 2023. If the current liquidity crunch in the banking sector re-accelerates again and spills over it could spell danger. The rand and other emerging market currency is trading stronger on the back of this, but could all unwind rapidly if things go pear shape. We do have our MPC announcement tomorrow and the market is expecting a 25bps hike in interest rates.
#Treasury #Recession #InterestRate #EmergingMarkets
