Spreadex Market Update
Powell Plates Up Fresh Rally For Equities As USD Slides Back
The ‘turnaround Tuesday’ effect was in full force yesterday it seems. Markets had been weaker initially ahead of keenly anticipated comments from Fed chair Powell. Speaking on the back of Friday’s bumper US jobs data, USD was sharply higher ahead of the comments as traders braced for a more hawkish delivery from Powell. However, ultimately, Powell’s comments were roughly the same as those made during the FOMC press conference. The Fed chair noted that inflation was starting to come down though still had some way to go and signalled that the Fed would likely need to keep pushing with rate hikes until next year. However, in the absence of any visible increase in hawkishness the prior dynamic reversed with USD coming off and equities surging higher.
Key Factors for Today
- USD falls as Powell fails to deliver hawkish surprise
- Equities bounce back as USD drifts lower again
- Uber due to report today on back of 40% YTD rally
- GBP & AUD lead in FX
- Oil & metals both higher amidst weaker USD backdrop
Coming Up
- USD – Fed’s Williams speaks
- Oil – EIA Inventories update
- USD – Fed’s Waller speaks
Equities Boosted As USD Drops Off
Equities traders were clearly relieved by the content of Powell’s speech yesterday with many indices turning higher off the day’s initial lows. US stocks were the clear winners with S&P and the Nasdaq both advancing strongly over the day, the latter by almost 3%. In the UK, the FTSE was driven higher in response to news of record profits from BP which recorded its best full year results in 2022 of the last 14 years. European stocks have been a little sticker amidst recent hawkish ECB comments, however.
US earnings season continues today, and all eyes will be firmly fixed on Uber. The company’s stock has seen an impressive 40% YTD rally and traders will be keen to see if today’s results can drive the stock higher of if the rally will be capped. Wall Street forecasts are for Q4 EPS of -$0.15 on revenues of $8.51 billion.
USD Falls, FX Majors Rebound
The US Dollar has reversed on Wednesday following Powell’s speech yesterday with the shift in narrative allowing for a firm rebound across FX markets. Interestingly, GBP has been the best performer so far today along with AUD which is being well supported via the uptick in risk sentiment on the back of Powell’s comments. A quiet data schedule today will put the focus on the two Fed speakers due though, it would likely take some very aggressive comments to detract from Powell’s relatively bland message yesterday.
Metals & Oil Trading Higher
In the metals and commodities space, both gold and silver are fighting back into the middle of the week. With USD under steady selling pressure both metals are back in demand and look poised for further gains while USD heads lower. Crude prices saw decent demand again yesterday also. A weaker USD as well as better US data recently is helping drive support for crude. Traders now look to today’s EIA update which is forecast to see a 2 million barrel surplus.
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