ILS: USD/ILS Tests 200-DMA, March CPI Data Eyed Tomorrow
Spot USD/ILS has sold off amid broad-based losses for the greenback and last trades at 3.6865, down 195 pips on the day. The pair tested its 200-DMA (3.6783) and a break here would open up the 50-DMA and the 100-DMA (3.6376 and 3.6290). On the flip side, the focus is on Apr 9 high of 3.8368.
- Israel will report March CPI data tomorrow at 16:30BST/18:30IDT. Consensus is for a deceleration in headline inflation rate to +3.2% Y/Y from +3.4% registered in February, which was was a notable downside surprise (Bloomberg median estimate was +3.7%). Speaking to the Globes last week, BoI Governor Yaron warned that US tariffs could push Israeli inflation higher.
- Goldman Sachs see headline inflation unchanged at +3.4% Y/Y, noting that "shekel strength drove last month’s large downside surprise to inflation, and we expect to observe the inverse in the March print, as ILS has sold off aggressively, by 4.9% in trade-weighted terms." They "expect shekel weakness to pass-through into imported food and goods inflation, [but]we expect this to be offset by base effects in core and fuel inflation and lower fuel prices in March."
- The TA-35 Index sits 1.8% higher on the day, approaching its 50-DMA (2,470).
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
