Mixed Action in Markets Following Hawkish Fed Comments

Following fairly lacklustre comments from Fed’s Powell on Tuesday, yesterday saw a raft of more hawkish commentary from several Fed members. Fed’s Williams reiterated Powell’s message of “higher for longer” on rates, though was seen raising the ante by signalling that rates might need to stay at restrictive level for years to come in order to bring inflation sustainably down. Kashkari followed up on these comments by warning that peak rates might need to exceed 5.4%, well above the Fed’s current projected peak rate. These comments saw US markets come under selling pressure yesterday as USD stabilised though we will see today if there is any follow through or if this was just a blip.

Key Factors for Today

- USD saw better buying yesterday on further hawkish Fed comments
- Equities markets saw mixed action though mostly bullish again today
- Uber shares spike on earnings beat
- NZD leading in FX on hawkish RBNZ expectations
- Metals and oil both higher today – crude shrugs off EIA inventories build

Coming Up

- EUR – EU Economic Forecasts
- GBP – Monetary Policy Report hearings
- USD – Unemployment claims

Equities Stunted by Hawkish Fed Comments

Equities markets saw mixed action yesterday. US stocks slid back as hawkish Fed commentary caused some pause for thought. The FTSE was seen hitting record highs yesterday, supported by a NIESR report suggesting the UK would likely avoid a recession this year. Sentiment looks mostly bullish across the European open today as traders brace for the German CPI and BOE’s Bailey who testifies to the treasury committee today.

Uber Spikes on Earnings Beat

On the US earnings front Uber gapped higher by over 7% at the open yesterday after the company posted bumper Q4 earnings. The ride hailing and food delivery app posted EPS of $0.29, well above the -$0.15 forecast, on revenues of $8.6 billion, above the $8.5 billion the market was looking for. Today, focus will be on Pepsi and Paypal which are both due to report.

NZD Takes The Lead

A softer start for the US Dollar on Thursday has seen risk currencies swinging back into favour with NZD the strongest performer so far. The antipodean currency is making strong gains across the board. No clear river behind the move today so flows are likely linked to hawkish RBNZ expectations as traders look where to focus next with the ECB and BOE seen winding down in coming months.

Metals & Oil Trading Higher

In the metals and commodities space, both gold and silver are trading in the green again today. Metals have been fighting to build a recovery rally this week though upside has been very contained on the back of last week’s heavy selling, suggesting both are at risk of further losses unless they can break higher. Crude prices are back in demand across the European open today after putting in another solid rally yesterday. Crude futures are now around 9% higher off the weekly lows, shrugging off the EIA reporting a 2.4 million barrel surplus yesterday.