NAB – The Morning Call · Market whiplash as sentiment takes a hit

Market whiplash as sentiment takes a hit

Friday 6th May 2022

Yesterday, as Jerome Powell gave the post-FOMC press conference, the US dollar strengthened, equities shot up and front-end bond yields fell sharply. Today, there’s been a swift reverse. The dollar is the highest in years, 10-year Treasuries are well over 3% and the share market has seen one of the biggest turnarounds ever. Does this suggest markets have a growing fear of a hard landing from the hawkish Fed rate path? NAB’s Gavin Friend says it is a challenging pathway for the Fed, but inflation will come down, hopefully, before causing too much turmoil in the economy. The risk to the economy was outlined by the Bank of England Governor Bailey, as they raised interest rates 25 basis points. Their forecasts make grim reading. And the Aussie dollar took a hit as risk sentiment soured. There will be a lot of interest in the projections in today’s Statement of Monetary Policy.

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