Traders are waiting for a batch of U.S. economic updates set for release on Thursday. These include the first estimate of fourth quarter GDP; weekly initial jobless claims; durable goods orders for December; and the Chicago Fed national activity index, all due at 8:30 a.m. Eastern. New home sales for December will be published at 10 a.m.

Together, they may provide a bit more evidence regarding the likely trajectory of Federal Reserve monetary policy.

Markets are pricing in a 99.7% probability that the Fed will raise interest rates by another 25 basis points to a range of 4.50% to 4.75% after its meeting on February 1st, according to the CME FedWatch tool, as the central bank seeks to curb inflation running at more than three times its 2% target.

The central bank is expected to take its Fed funds rate target to 4.9% by June 2023, according to 30-day Fed Funds futures.

The Treasury is due to sell $35 billion of 7-year notes on Thursday.

What are analysts saying

Jan Nevruzi, U.S. rates strategist at NatWest Markets was looking ahead to the Fed’s stance at next week’s meeting.

“[We] do think the Fed’s forward guidance could also include some changes, notably updating the ‘ongoing’ wording into something akin to ‘some further’ rate hikes will be appropriate,” Nevruzi wrote in a note.

“It was curious why Powell didn’t really push back against easing financial conditions when he had the chance — perhaps the drop in the rate of increase in inflation and the modestly weakening data was encouraging enough to justify the markets’ reaction.”

“But even if the FOMC hinted at a pause with the hope of delivering a more gradual tightening (i.e. still reach the 5.125% in the dots, but over a longer period of time), we think markets would effectively null out all of the remaining hikes and price in more cuts,” Nevruzi concluded.