Banks expect 3 rate hikes by the Fed

Major US banks such as Goldman Sachs and JP Morgan indicate that the Fed will most likely continue to raise interest rates until the middle of the year. This would potentially result in 3 hikes, most likely by 25 basis points, pushing rates to 5.5%.

The market is currently pricing in almost 75 bp hike until July 2023, which shows that interest rates should exceed not only 5.0% level, but also 5.25%.

According to Goldman, further interest rate hikes will cause deterioration of fundamentals in many markets, including the oil market.

Barkin remains hawkish and points to the extremely good situation on the labor market. On the other hand, today's trade price data is rather disinflationary - import prices falling as expected and export prices rising.

The path of interest rates implied by the market. Just a week ago, the market was taking into consideration potential 50 bp rate cuts this year. Now these expectations have dropped to 20 bp. Source: Bloomberg

 EURUSD pair briefly fell towards 1.06 level. Source: xStation5