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Started by PocketOption, Feb 04, 2023, 11:23 am

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Fed Gives Markets a Dovish Hike

The Fed decided to hike rates 25 bps as expected, and the Fed Chair made several hawkish comments to suggest no change in the Fed’s rhetoric, but markets rallied sharply after Jerome Powell’s dovish remark, where he said, “for the first time, the disinflationary process has begun.”


Key Factors for Today

  • Fed hawkish as a whole, but JP pushback soft

  • All eyes on big tech reports and jobs data Fri

  • Euro and gold at multimonth highs ahead of ECB

  • Cable restricted ahead of BOE due to poor data

  • Crude falls on EIA’s yearly price projection

Nasdaq Hits 4 ½ Month High on JP’s “Disinflation” Remarks

Despite Fed Chair Jerome Powell said there had been “encouraging” signs of bringing inflation down, traders focused primarily on the mention of “disinflation” and that the Fed’s focus is on the mandate and “not on short-term moves”. Nasdaq soared 3.25% to find temporary resistance at 12500. Later today, earnings from Amazon, Google, and other big tech companies will decide whether the trend continues towards 12880 or reverses ahead of the NFP tomorrow.

Euro at 10-Month Highs vs Dollar After CPI and Fed

The Eurozone CPI racked up the third month of deceleration, coming in at 8.5% compared to the 8.9% expected. But core inflation remained flat at 5.2%, one decimal above expectations, making ECB’s work harder. However, monthly inflation came in negative and well below expectations, with markets waiting on today’s meeting for further clarity. Supported by the Fed, EUR/USD finally tagged the $1.10 handle after closing 1.16% higher on the back of the dollar’s demise. Gold had a similar print, with a peak at $1955/oz and a target at the 2k handle.

Poor UK Data Keep Cable Upside Limited

UK’s nationwide housing prices fell more than expected for the fifth consecutive month, while the prior month was revised even lower. The Final Manufacturing PMI was revised higher but still confirmed the sixth consecutive month of contraction. Cable was the least benefited from the dollar’s fall, rising only 0.44% to $1.24, with eyes on the BOE later today.

EIA Sends Crude 3% Lower to Meet Projection Price

The latest report from the EIA showed that US oil production fell by 35K boepd/month, while at the same time, demand increased by 178K boepd/month. Of note is EIA’s projection of crude oil prices at $77 per barrel for the year, where crude fell to from the open, evaporating nearly 3% of recent gains for a 3-week low.

US Economic Data Provides Mixed Picture

The December JOLTS job openings rose above 11M again, suggesting a dynamic jobs market and volatile readings. However, January’s ISM Manufacturing came in below expectations, driven by a significant drop in new orders.

On the docket

  • BOE Interest Rate Decision

  • ECB interest Rate Decision

  • Initial Jobless Claims

  • ECB Presser and Lagarde Speech

FX 1-day relative performance (USD)

  • Kiwi and euro 0.37% and 0.21% higher

  • Yen and cable 0.15% and 0.12% up

  • Aussie and Swissy 0.08% higher

  • Loonie nearly unchanged

  • Silver 2.52% and gold 1.28% higher

  • Crude and brent 0.56% and 0.45% higher

  • Natural gas 2.07%


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