UBS said that their basic assumption is still that the Fed rate has reached the peak of this round of interest rate hike cycle.
But with two more CPI data and two non-farm payrolls reports ahead of the Fed’s September meeting, investor sentiment could continue to shift.
Moreover, markets are already pricing in a soft landing, and there is growing belief that inflation will gradually fall back to 2% at relatively small economic cost.
Markets will be affected if there are signs in the future that the chances of a soft landing for the U.S. economy have declined.
Be wary of the possibility that the non-agricultural data released tonight will serve as a catalyst for further interest rate hikes by the Fed, and be wary that the report may shake the market’s complacency towards a “soft landing”.
