Market Analysis

Fed chairman Powell’s speech pushes the dollar up

FOREX

The US dollar gained ground on other major currencies, following a speech by the chairman of the Fed late on Monday. Jerome Powell stressed the central bank’s resolve to tackle inflationary risks, demonstrating the willingness to, if necessary, accelerate the pace of the ongoing monetary policy tightening. This stance contrasts with that of other central banks, with the Bank of Japan’s governor saying earlier today that the ongoing level of stimulus remains appropriate, while Christine Lagarde, the president of the ECB, mentioned the impact of the war in Ukraine on the continent’s economy, highlighting the fact that the ECB and the FED are at different stages in the tightening cycle. Against this scenario, further strengthening of the dollar against the euro and the yen will not surprise.

Ricardo Evangelista – Senior Analyst, ActivTrades

Source: ActivTrader

 

GOLD

Gold prices hedged down during early Tuesday trading, due to the precious metal’s inverted correlation with the US dollar. The greenback strengthened as the 10-year treasury yields reached 2.3% for the first time since 2019, after the Fed’s chairman, Jerome Powell, surprised observers by demonstrating an aggressive stance in relation to the need to control inflation, stating that the central bank will act as necessary and increase rates by 25 basis points or even more, as many times as required. However, the downside created by the strength of the dollar is limited by concerns over the ongoing conflict in Ukraine, with US intelligence reporting the possibility of an escalation that may involve the use of chemical weapons by Russia; Gold prices tend to increase when the geopolitical temperature rises, so any losses remain limited by the ongoing war in Eastern Europe.

Ricardo Evangelista – Senior Analyst, ActivTrades

Source: ActivTrader

 

EUROPEAN SHARES 
European indices climbed significantly higher, with benchmarks from Stockholm to Lisbon +1% higher shortly after the opening bell, as the “risk-on” mood continues.

Investors’ appetite for riskier assets has been given another fresh boost following Jerome Powell’s hawkish wording yesterday evening, as many traders welcomed the Fed’s strong will to combat inflation. However, on the other hand, flattening yield curves suggesting rising concerns of an economic slowdown to come in the longer run, associated with the lack of any clear breakthrough in Ukraine-Russia diplomatic talks in the short-term, could be seen as a sign market volatility and large swings in prices may not be over yet. That said, investors are likely to be provided with more clues this week as BoE governor Bailey and ECB president Lagarde are expected to speak before the BIS Innovation Summit today and tomorrow, while an emergency NATO summit looms on Thursday.

Pierre Veyret– Technical analyst, ActivTrades

Source: ActivTrader

 

The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and as such is to be considered to be a marketing communication.

All information has been prepared by ActivTrades (“AT”). The information does not contain a record of AT’s prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.

Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acting on the information provided does so at their own risk.