When Hawks Cry – Halyard’s Weekly Wrap – 6/23/23

Hawkishness dominated the conversation this week as Chairman Powell presented the annual state of the economy to Congress.  His comments were broadly in line with his post-FOMC comments from last week, with emphasis that the June pause was just that and that the overnight rate is likely to rise further later this year, perhaps even twice.  The market took notice, pushing the 5-year Treasury note above 4.0% for the first time since February.  Similarly, the April 2024 Fed Fund future traded above 5.00% this week as traders speculated that the overnight rate will remain high into next year.

For their part, the Bank of England raised the overnight lending rate to 5.0%, a 50 basis-point hike.  Economists had expected a hike but only 25 basis points.  As with the Federal Reserve, the BOE left open the possibility that further rate hikes are likely to be needed to battle their inflation problem.  Reflecting that expectation, the Pound Sterling continues to trade strongly against the U.S. dollar above 1.27, that’s nearly 20% above the low touched last September.

Looking ahead, the economic calendar is rather full next week with Durable Goods, Case-Shiller home price index, Conference Board highlighting the many releases, although with the Independence day holiday falling on the following Tuesday, we expect transaction volume to slow as the week winds down.

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