June Fed rate hike back on the table

June Fed rate hike back on the table. The outlook for a June Fed rate hike came surging back as FOMC minutes and hawkish Fed comments suggested that the market was underrating the strength of the US economy. The market displayed all the classic patterns of a pre-hike “taper tantrum” with USD & US yields rising, and risky assets such as commodities and equity selling-off. Yet, in our view, mixed incoming US economic data suggests that the Feds hawkish view might be erroneous. In Japan, economic data improved as the solid 1Q GDP avoided a technical recession, lowing the probably of BoJ easing in June. In Mexico, Banxico minutes indicated that concern over market volatility and MXN weakness will keep the central bank sidelined but ready for action. Finally, growing prospects of Fed interest rate tightening could trigger a broader episode we call “Amexit.”

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This article is a guest blog written by Peter Rosenstreich from Swissquote