Risk of panic if Fed doesn't hike tomorrow

Chart 1 Source: Tradingview Mayl 02 2023 6:11 UTC

The above chart illustrates the relative long term percentage performance of the St. Louis Fed Financial Stress index vs the US Fed funds rate.

Market Talk

Central banks do have a history of shocking markets, even though the US Fed is not one that likes to “rock the boat” the risk of a low probability high impact event should not be ruled out.

• Many market participants expect the Fed to signal the end of the interest rate hiking cycle tomorrow
• The +0.25% rate hike is basically already baked into the market for tomorrow's US Fed interest rate decision

Nevertheless, a low probability high impact event can never be ruled out, and shock waves could be triggered across the global financial markets if the Fed makes no hike tomorrow.

Upcoming Key events:

• Wednesday May 03 6:00 PM UTC: US Fed interest rate decision, Gold, EUR/USD, SPX500, Dow 30, US100 indices in focus
• Thursday May 04 12:15 UTC: European Central Bank (ECB) interest rate decision, EUR/USD, EUR/JPY, EUR/GBP in focus
• Friday May 05 12:30 UTC: US Nonfarm payrolls (NFP)

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Today’s economic calendar

The Reserve Bank of Australia (RBA) upside +0.25% rate hike surprise raising it to 3.85%, surprising markets that were expecting no rate change

Asset focus: AUD strengthens

• AUD jumps +1% against the JPY, CHF, USD, CAD, EUR, and NOK

Source: Trading View / J. Knobel May 02 2023 6:37 UTC

Earnings Season:

On deck today:

Source: Trading View / US100 earnings calendar May 02 2023 6:46 UTC

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Today’s trading bullets

AUD strengthens after RBA surprise rate hike

AUD/JPY +1.10 % at time of writing

AUD/JPY: current price 92.34, prospects for advance towards 93.7

• Upside prospects for a test of resistance at 93.7 (61.8% retracement from the 52 week low)
• Downside risk near the support at 90.38 (38.2% retracement from 13 week high)