Waiting for the Fed

Giles Coghlan LLB, Lth, MA Financial Source

This week was a holding week ahead of the Fed meeting next Wednesday. The recent slew of US data has shown a mixed outlook, but US labour costs showed a large drop this week which will reassure some investors that the Fed may feel at liberty to slow the pace of US rate hikes. However, the problem is that the US picture is far from clear, so the sentiment turned neutral this week among US investors ahead of the Fed next week. In other news, the BoC signalled that it may be at its peak and could stop hiking rates now if inflation does not keep rising.

Other key events from the past week

S&P500: US Labour costs drop, Dec 07: News that US unit labour costs have fallen to 2.4% q/q from 3.1% q/q expected helped lift hopes of slower Fed hikes this week. Major focus remains on US jobs data and this offset some of the angst from the high average hourly earnings indicated by the last NFP print.
CAD: Dovish hike by the BoC, Dec 07: The Bank of Canada hiked by 50bps this week to 4.25%. However, the BoC see slowing growth ahead for the economy and is now considering whether it is necessary to hike rates further.
USD: US Initial Jobless Claims, Dec 08: The last US FOMC minutes recognise the high chance of a US recession. This week’s initial jobless claims showed continuing jobless claims rose to 1671K vs 1600K expected. This is one more piece of data that could cause the Fed to signal slowing rates next week.

Key events for the coming week

USD: Inflation focus, Dec 13: Key focus after a very strong wages print from the last NFP remains on US inflation. A big print & expectations will grow for more aggressive Fed hikes which should support the USD & pressure stocks.
Stronger seasonals approach for silver: Is silver set to soar post the Fed meeting?
USD: Interest Rate decision, Dec 14: How high will the Federal Reserve need to go next year? 4.75%, 5% or even higher above 5.25%? This is what traders and investors will be wanting to know from the Fed this Wednesday.

Learn more about HYCM

Author

Giles Coghlan LLB, Lth, MA

Financial Source

Giles is the chief market analyst for Financial Source. His goal is to help you find simple, high-conviction fundamental trade opportunities. He has regular media presentations being featured in National and International Press.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.