HSBC said Wednesday's U.S. inflation report could serve as the next catalyst to push Federal Reserve rate hikes out of market pricing. Multi-Asset Strategist Duncan Toms noted that hawkish Fed rate pricing is facing a reality check from data, and last week's labor market report provides further evidence that peak U.S. Treasury hawkishness may have already been seen. The firm pointed out that since July 23, U.S. rate pricing has pared some of its rate-hike expectations. HSBC's nowcasts point to another benign reading on Wednesday, following an unexpectedly dovish June print that was broader than just a weaker oil story. Such a print could then be the next dovish catalyst for Fed rate hikes coming out of the price, likely causing the U.S. Treasury curve to bull-steepen as hikes are priced out further, making for a potent Goldilocks backdrop with broad-based gains across virtually all asset classes.
HSBC Holdings PLCHSBC's strategist suggests a benign inflation print could lead to dovish Fed pricing, benefiting risk assets and HSBC's multi-asset outlook.
