Gold prices slipped below the key $2,000 level due to a
resurgent dollar, while Treasury yields rose on growing market
expectations that the Fed will hike rates when policymakers
conclude a two-day meeting on May 3.
Consumer price index data on Wednesday will encourage the
market to see a rate hike next month, but the more important
data will be Thursday and Friday when reports will show the
extent of banks' emergency funding, said Marc Chandler, chief
market strategist at Bannockburn Global Forex, in New York.
"My sense is that the labor market and CPI would favor the
Fed raising rates again. However, what has made the market have
second thoughts is the extent of the tightening of lending," he
said.
"We saw in the last two weeks there's a record decline in
commercial and industry loans," he said.
Futures show a 69.3% likelihood the Fed will raise rates by
25 basis points in May, according to CME Group's FedWatch tool.
With recession worries mounting, investors are betting the
tumult in the banking system sparked by the sudden collapse of
Silicon Valley Bank on March 10 will tighten credit conditions.
But traders also are betting that the Fed will cut rates in
the second half to ward off an economic downturn.
Minutes of the Fed's policy meeting in March are also
scheduled to be released on Wednesday.
Trading was light as markets were closed in Europe,
Australia and Hong Kong for Easter.
The dollar index rose 0.735% and the two-year Treasury yield, which typically moves in step with
interest rate expectations, added 3.6 basis points to 4.008%.
On Wall Street, the Dow Jones Industrial Average fell 0.11%, the S&P 500 lost 0.57% and the Nasdaq Composite dropped 0.92%. The dollar extended its gains against the yen to hit 133.835 , the highest since March 17, on receding expectations of a near-term tweak to Japan's ultra-loose monetary policy. Japan's new central bank governor Kazuo Ueda said it was appropriate to maintain the bank's policy for now as inflation has yet to hit 2% as a trend, suggesting he will be in no rush to dial back its massive stimulus. The yen was last 1.26% weaker at 133.83 per dollar. Asian shares were little changed overnight with MSCI's broadest index of Asia-Pacific shares outside Japan slipping 0.05%. China shares slipped, with the blue chip CSI300 Index 0.32% lower and the Shanghai Composite Index easing 0.16% amid rising geopolitical tensions around the Taiwan Strait. China announced three days of drills on Saturday, after Taiwan's President Tsai Ing-wen returned to Taipei following a meeting in Los Angeles with U.S. House of Representative Speaker Kevin McCarthy. Spot gold dropped 1.1% to $1,985.94 an ounce.
U.S. crude fell 0.19% to $80.55 per barrel and Brent was at $84.88, down 0.28% on the day. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates YTD Global asset performance Asian stock markets ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Ankur Banerjee; Editing by Kirsten Donovan)
Twitter: @AnkurBanerjee17;))