Dollar Priced 30bps in the U.S Money Market as Feds Prepare to Hike Interest Rate

The dollar gained in the early hours of Friday morning and is currently on track to have largest surge in a week in the last seven months. The gain was due to the projection of interest rate spike in the United States of America (USA).

After the Federal Reserve meeting, the money market priced 30 bps of rate hikes in March and more than 120 bps in cumulative increases before the end of the year.

According to  Commerzbank strategists, “The market has interpreted the Fed chair’s comments in a hawkish manner even though (Jerome) Powell’s comments has mainly affected the expectation of the speed of the rate cycle, but not so much the extent of this cycle,”

However, the euro declined on Friday, however the single currency creeping marginally higher to $1.1152 from Thursday’s 20-month low of $1.1131.

Data including U.S. employment cost index and University of Michigan sentiment surveys on Friday is likely to reaffirm the Fed’s hawkish stance.

Meanwhile, The yen hovered at 115.43 to the dollar while the Australian and New Zealand dollars languished – the kiwi dipping slightly to a fresh 15-month low of $0.6570.

In the Nigerian Money market, According to chapel hill, on the 26th  January 2022, funding rate in the money market, the Open Buy Back and Overnight  rates inched lower at 0.50% and 1.00% respectively. This coincided with a compression in the level of funding in the market. Specifically, the market closed at N281.53bn long today as the net impact of the NTB auction yesterday pushed N94.49bn out of the market.

In the fixed income market, The bonds market turned out bearish today with a 4bps expansion to 11.54%. This was driven by a sell-off in maturities on the belly of the curve. In the NTB and OMO space, however, yields flattened out today at 5.22% and 5.50% respectively. At the NTB auction which was held on the 26th January 2022, the CBN sold N223.75bn worth of bills across three maturities (91-day: N2.68bn, 182-day: N3.54bn and 364-day: N217.53bn) against the initial offer of N129.33bn. Investors’ subscription was put at N475.63bn, yielding a bid-to-cover ratio of 2.1x. The auction cleared lower across the three maturities (91-day: -1bps, 182-day: -14bps, 364-day: -11bps).