Psychological levels

As expected, there was no rate cut after yesterday’s FOMC, the last one for Jerome Powell, that will continue as governor, but will pass the chairmanship to Kevin Warsh. And the market thinks that with everything that’s going on in Iran, the Fed will not be able to cut this year , according to Polymarket (see chart below). Bonds didn’t like the conclusion and yields spiked up. The 30 year Treasury touched 5%. It’s a psychological mark, but at this juncture, is important. On top of that, the U.S. dollar strengthened, and the Yen touched 160. Another psychological mark. Today the Yen is strengthening abruptly, which means the BoJ intervened, selling dollars to defend the Yen. Brent touched $120/barrel. Another one. Hormuz is still closed. The Bank of England has just ended its meeting as well and announced no change in interest rates, due to inflation caused by oil prices. Uk 10 year gilt touched 5%. And the US equity markets are still too close to all time highs. In fact, futures today are pointing to a fresh high today. High volatility, high cost of debt and high levels of debt with inflation going higher. Perhaps the voting machine is going to morph into a weighting machine.

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