Spreadex Market Update
Powell Avoids Rates Comment – Markets In Limbo Ahead of US CPI Tomorrow
Markets appear to be treading water ahead of tomorrow’s US CPI print the US Dollar seeing very muted action yesterday. Most equities indices too were seen trading within the prior day’s range. Yesterday’s speech by Fed chairman Powell, the first since the December FOMC, held the potential to drive some volatility. However, Powell’s comments (regarding the need for the Fed to be independent to fight inflation) fell short of directly addressing monetary policy and as such, no market reaction was seen. With a quiet data sheet today flows are likely to remain limited ahead of tomorrow’s headline data.
Key Factors for Today
- USD weakness continues with Fed avoiding rates comment – US CPI main focus tomorrow
- Equities muted but remain broadly positive – quiet data sheet today
- EUR best performer in FX – AUD hurt by rising inflation
- Gold breakout continues, silver higher too
- Oil traders look to EIA today – 2million barrel drawdown forecast
Coming Up
- OIL – EIA Inventories
- USD – 10y bond auction
- JPY – Current account
Equities Muted Ahead of Tomorrow’s US Inflation
Equities markets saw broadly positive action yesterday, albeit rather muted. European assets remains the best performers this week. US stocks were seen turning higher on the back of subdued USD action over the last two days. US earnings season is underway with companies reporting for Q4 last year and expectations are geared towards lower returns with data from FactSet pointing to the first quarterly contraction since Q3 2020. The first big names are due to report on Friday with JP Morgan, Citi, Blackrock and Delta Airlines scheduled, among others. Ahead of those releases, tomorrow’s US CPI release will be a key focus point for traders with a further cooling of inflation likely to help lift stock sentiment globally.
EUR Rallies – AUD Hurt By Rising Inflation
The decline in USD this week has seen EUR steadily climbing with the currency seeing the biggest gains so far on Wednesday. Risk currencies have been well supported also, with AUD and NZD making gains across the week. Overnight, a stronger-than-expected Aussie CPI print (7.3% vs 6.9% prior, 7.2% expected) is dampening AUD a little with fears that the RBA might be forced to step up the pace of tightening once again, hurting growth prospects. EUR meanwhile is benefiting from better eurozone data recently and lower energy prices which are helping growth prospects in the eurozone.
Gold Rally Continues – Crude Traders Look to EIA
In the metals and commodities space, gold and silver are trading higher today. Gold continues to break out to fresh highs on the year while silver is fighting to resume upward momentum following the recent correction lower. Crude prices remain more constrained with the market seeing plenty of two-way action this week, ultimately keeping hemmed in. Today traders look to the latest EIA report which is forecast to record a 2-million-barrel drawdown, which should underpin the market somewhat.
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