JPow rocked markets on Thursday when he hinted that the Federal Open Market Committee is in no rush to cut interest rates further.
How have major assets reacted to this possibility?
We break down the biggest market movers of the latest trading sessions!
Titles:
- Reserve Bank of Australia Governor Bullock He believes the central bank is “sufficiently restrained” and will remain restrained until they are confident of the “downward path in demand.”
- RICS: UK house price growth appears to be ‘gradually gaining momentum’ although rising bond yields could represent headwinds
- The rapid change in employment in the Eurozone maintained a rise of 0.2% on a quarterly basis as expected in the third quarter
- Eurozone GDP It saw another 0.4% QoQ increase in Q3 as expected
- Eurozone industrial production fell by 2.0% month-on-month in September after a 1.5% increase in August.
- FOMC voting member Adriana Kugler He prefers to keep interest rates steady “if inflation does not decline further” but is open to gradually lowering interest rates “if the labor market suddenly slows.”
- US Producer Price Index for October: 0.3% mo/month as expected (0.2% previously); Core Producer Price Index accelerated from 0.1% to 0.2% as expected
- Initial unemployment claims in the United States For week ending November 9: 217k (224k expected, 221k previously)
- EIA: US crude oil inventories jumped by 2.1 million barrels in the week ending November 8 (+0.4 million expected, +2.1 million previous)
- Federal Reserve Chairman Powell He said “The economy is not sending any signals that we need to speed up interest rate cuts.“Give them”The ability to handle our decisions carefully.“
Broad market price movement:
Dollar index, gold, S&P 500, oil, US 10-year yield, Bitcoin overlay Chart by TradingView
The US dollar maintained a firm grip on major assets yesterday, supported by expectations of higher deficit spending and continued US CPI and PPI data, cooling hopes for a near-term interest rate cut from the Federal Reserve.
JPow added to the cautious sentiment, noting that “The economy is not sending any signals that we need to speed up interest rate cuts.This came after other members of the Federal Open Market Committee signaled a more gradual approach to easing, limiting risk appetite.
While European stocks managed to achieve a slight recovery from the trade war tensions, all US indices fell, affected by the diminishing prospects for further cuts in federal interest rates. the CME FedWatch tool It now shows just a 59.1% chance of a 25 basis point cut in interest rates in December, down from 85% earlier this week.
The dollar’s extended rise put pressure on gold for the fifth session in a row, which is the longest series of losses for the metal in nine months. Gold got a boost from its decline near $2,540, ending the day just below $2,570. Bitcoin also saw further decline, falling to $87,500 after recently testing $91,500.
Meanwhile, WTI found support around the $68.00 level, briefly touching $69.30 before closing near $68.50. This came despite the International Energy Agency (IEA) forecasting an imbalance between supply and demand by 2025, and the US Energy Information Administration (EIA) reporting a larger than expected inventory build-up.
Forex market behavior: US dollar against major currencies:
Overlay of the US dollar against major currencies Chart by TradingView
The US dollar started the day strong, still supported by post-election trends. The dollar gained further strength after the euro zone reported relatively strong GDP and employment numbers but also weak industrial production data. The USD/CAD pair was an exception, likely due to the Canadian dollar receiving a boost due to higher crude oil prices.
The dollar gave up some of its gains just before the US session, as traders likely took profits ahead of the PPI report. Initially, higher PPI numbers lifted the dollar, although uncertainty surrounding the Federal Reserve’s monetary policy decision in December brought it closer to its open rates.
Later in the day, Fed Chairman Powell took the podium, suggesting that the Fed is in no rush to cut interest rates further. This statement gave the dollar new impetus, pushing it higher by 0.30% to 0.70% against most major currencies.
Potential catalysts coming on the economic calendar:
- Wholesale prices in Germany at 7:00 am GMT
- UK GDP (monthly) at 7:00 AM GMT
- Preliminary UK GDP (Q/Q) at 7:00 AM GMT
- UK Goods Trade Balance at 7:00 AM GMT
- UK Services Index at 7:00 AM GMT
- UK industrial and manufacturing production at 7:00 AM GMT
- Swiss Producer Price Index at 7:30 AM GMT
- Final CPI in France at 7:45 AM GMT
- EU economic forecasts at 10:00 AM GMT
- Manufacturing and Wholesale Sales in Canada at 1:30 PM GMT
- US retail sales will be announced at 1:30 PM GMT
- New York manufacturing index at 1:30 PM GMT
- US import prices at 1:30 pm GMT
- FOMC Member Collins will speak at 2:00 PM GMT
- US industrial production at 2:15pm GMT
- US business inventories at 3:00 PM GMT
- Australia’s leading CB index at 3:30pm GMT
- FOMC member Williams will deliver a speech at 6:15 PM GMT
We will see another data show in the next few sessions, as European traders will likely focus on UK GDP data and business investment numbers, which could signal the strength of the UK economy and weigh on the pound.
In the US, retail sales and industrial production numbers, along with speeches from FOMC members, may provide insight into consumer demand and the Fed’s stance and influence the dollar’s direction for the rest of the day.
Keep an eye out for any major surprises, as well as potential shifts in central bank rhetoric, which could steer the US currency in a strong direction and don’t forget to check the new currency correlation tool when making any trades!