Here’s the Google trend on the topic of “recession” in the US:
Amid Trump’s tariffs and softer US economic data at the balance, we’re seeing an uptick in interest on recession risks. And it’s also feeding into the commentary from market analysts.
NAB is out earlier noting that “most safe-haven assets such as Treasuries and the yen are higher in the early Asian session amid growing fears of a US recession”. Adding that “headlines of recession risk rising (from low levels) abound”.
Meanwhile, MUFG’s title for their note today also highlights this: “Asian Currencies Mixed; US Recession Fears Weigh”.
Even if traders had been pricing in said risks over the past few weeks via a more dovish Fed outlook, never underestimate the power of the social media echo chamber.
As things stand, the echo we’re seeing and hearing is one of fear and that will make it challenging for risk trades to run against that backdrop.
The good thing in all of this is that people tend to move on quickly in this day and age. And the same applies to markets.
We’re now pricing in ~84 bps of rate cuts for the year by the Fed with odds of a May rate cut seen at ~59%. Is that a bit much considering the pivot away from just one rate cut priced in during the end of January? Is the Fed really going to be this dovish considering the recent data?
Those are fairly interesting questions and we’ll have to wait on the US CPI report this week and the FOMC meeting next week to have a better idea of where this is all going.
Feed from Forexlive.com