Market Analysis

The dollar lost ground following Powell’s speech

FOREX

The US dollar lost some ground to other major currencies after yesterday’s declarations by Fed chairman Jerome Powell, that it will take a few more meetings (months) for the US central bank to further tighten its monetary policy. The statement disappointed dollar bulls, who had expected the Fed would return to a more hawkish policy. With three rate hikes this year and the unwinding of the purchases program already baked into the value of the dollar, it will take additional monetary tightening steps to support further greenback gains. Today’s CPI numbers may – if surprising to the upside – reignite the narrative of more tightening being required to contain inflation; on the other hand, should such numbers disappoint to the downside, they may trigger further dollar weakness.

Ricardo Evangelista – Senior Analyst, ActivTrades

 

Source: ActivTrader

 

GOLD
Gold prices rose on Tuesday, following Jerome Powell’s testimony to the US senate. The chairman of the Fed poured some water over the fire of those who expected further tightening of the US central bank’s monetary policy. Jerome said stepping up the pace of rate hikes and running down the balance sheet are decisions not to be taken lightly and, if they do eventually come along, the process would likely to take several months. The impact of this statement was immediate, driving down treasury yields and the US dollar, in a dynamic that benefited gold due to the inverted correlation with the American currency.  Later today, the newest US inflation figures will be published, an event that will be closely followed by gold investors, as a high number is likely to support the dollar and therefore weigh down on the precious metal; however, should CPI numbers disappoint to the downside, then there will be scope for further gold gains.

Ricardo Evangelista – Senior Analyst, ActivTrades

 

Source: ActivTrader

 

EU STOCKS
Stock markets opened mostly lower in Europe on Wednesday, despite bullish price movements registered overnight in China and Japan, following the rising prospect of further dovish monetary measures from the PBoC. European benchmarks and US Futures are telling a different story this morning as prices registered a pull-back shortly after market open. While this limited market correction may be seen as “normal” following yesterday’s strong trading session, many investors see this as a hedge trade ahead of the crucial US inflation report due later this afternoon. Stock traders are likely to remain cautious before data release, especially after Fed chairman, Jerome Powell, said yesterday the US central bank would not hesitate to tackle price pressure. Even if further rate hikes seem to be already well priced-in by the market, investor concerns remain over the speed with which liquidity may be withdrawn this year. Meanwhile, energy stocks are also likely to trade sideways during the first part of the trading session, as investors await today’s weekly US Crude Oil inventories release. The best EU performance comes from London as the FTSE-100 index cleared its resistance at 7,530 pts, with 7,575 pts now as the next target.

Pierre Veyret– Technical analyst, ActivTrades

Source: ActivTrader

 

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