[av_revolutionslider id=’32’ av_uid=’av-a1kbp3p’]
06 February 2023
- Central banks did not disappoint investors last week. The US Fed raised interest rates by 0.25% on Wednesday as expected. The Fed slowed the pace, but plans to continue the increase until inflation starts to decline towards its target of around 2%. According to Fed chief Jerome Powell, a restrictive approach will need to be maintained for some time as the Fed does not want inflation to return. “We have covered a lot of ground, full effects yet to be felt,” Powell said, adding that although the central bank has done a lot of work and the economy has slowed significantly over the past year, there is still a lot of work to be done. The labor market in particular is still tight, as data on Friday proved. “Pace of job gains has slowed and nominal wage growth too, but labor market still out of balance,” Powell said in comments after the decision was announced.
- The Bank of England also raised its rates for the tenth consecutive time, up 0.50% to 4.00%. The BoE said in its statement after the rate announcement that “past increases in bank rate expected to have increasing impact on the economy in coming quarters,” and that inflation risks are still skewed to the upside. Thus, if there are signs of more significant pressures, further monetary tightening will be necessary. At the same time, Boe revised its growth forecasts and “estimates GDP in 2023 -0.5% (November forecast: -1.5%), 2024 -0.25% (November: -1%), 2025 +0.25% (November: +0.5%), based on market rates.”
- Also, the ECB did not surprise and raised the interest rate by 0.50% to 3.00% and plans to continue the set pace at the next meeting in March. According to ECB chief Christine Lagarde, weak growth is still expected as “high inflation and tighter financing conditions dampen spending and production”. However, Lagarde said the economy is more resilient than expected and rising wages could restore some of the purchasing power. It is also “important to start rolling back fiscal support,” she said, because further fiscal measures could exacerbate inflationary pressures and that would require a stronger ECB response.
Indices
US stocks ended the week mixed, with the DJIA ending in a slight loss, but the S&P 500 saw another week of growth thanks to good macro data, and the tech Nadaq was helped in particular by Meta’s results. The latter added 23% on Thursday after Wednesday’s results, its biggest daily gain in nearly a decade.
European stocks also ended the week in gains as inflation slows faster than expected and the economy unexpectedly grows. The pan-European STOXX Europe 600 ended the week 1.23% higher, Germany’s DAX added 2.15%, France’s CAC 40 gained 1.93%, and the UK’s FTSE 100 Index climbed 1.76%.
 |
US30 -0.15% |
|
US100 +3.34% |
|
US500 +1.62% |
 |
GER40 +2.15% |
Commodities
Gold, like other precious metals, posted its worst weekly result in seven months. Although the gold price shot up after the Fed meeting, data from the labour market, both Thursday’s initial jobless claims and NFP and unemployment, signify fears of further monetary tightening, which does not suit the gold price, unlike the US dollar, and for the first time in almost a month it fell below USD 1,900 per ounce.
The price of natural gas in the U.S. also continued its unending decline, despite the arrival of freezing weather in the key Northeastern U.S. region. The price hit its lowest level since December 2020 during the week, taking prices down more than 16% for the week and has already lost 63% from its last peak in December 2022.
 |
Gold -3.24% |
 |
Silver -5.19% |
 |
BRENT -7.65% |
 |
NATGAS -16.23% |
Forex
The US dollar was helped to weekly growth by Friday’s US labour market data, which significantly exceeded expectations and thanks to that the US currency strengthened by more than one percent against a basket of currencies on Friday alone. The British pound fell to its lowest level against the US dollar since January 6, while against the euro and Japanese yen the US dollar is the strongest since January 19.
“After the Fed meeting it looked like markets had the advantage – it was still pricing in a rate cut, they took interest rates down, and they took the dollar down, and now I think 48 hours later the Fed looks like they might have the upper hand again,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
 |
EUR/USD -0.68% |
 |
USD/JPY +1.02% |
 |
GBP/USD -2.79% |
 |
USD/CAD +0.65% |
Macro
The biggest expectations and also the biggest surprises came at the end of the week in the USA. Already on Thursday weekly jobless claims surprised, which fell to their lowest level in nine months. The Labor Department reported that employers added 517,000 nonfarm jobs in January, roughly triple consensus estimates and the biggest gain in six months. The unemployment rate slipped to 3.4%, its lowest level since 1969.
The European economy surprisingly grew by 0.1% in the fourth quarter according to preliminary data (forecast -0.1%), while annual growth slowed from 2.3% to 1.9%, but was expected to grow by 1.8%. Inflation also surprised, with price growth slowing from 9.2% to 8.5% on a year-on-year basis, when markets were expecting a 9.0% rise. However, core inflation, excluding energy and food prices, remained at an all-time high of 5.2% YoY.
We also saw better-than-preliminary numbers for PMIs, both in the manufacturing and services sectors, on both sides of the Atlantic. Although the manufacturing sector still remains below 50, indicating contraction, the services sector in the EU confirmed growth above the 50 level and in the US, the ISM PMI rose surprisingly to 55.2.
What to watch out for this week
- The EU and US central banks raised rates as expected last week and this week’s rate hikes are expected to come mainly from some of their officials. ECB chief Christine Lagarde will speak as early as Monday, then later in the week Vice President Luis de Guindos and Executive Board member Isabel Schnabel will join in, along with Germany’s central bank President Joachim Nagel.
- Much is also expected from Fed chief Jerome Powell, especially in the wake of unexpectedly strong jobs data in last Friday. In addition to Powell several other Fed officials are also scheduled to make appearances, including New York Fed President John Williams, Minneapolis Fed President Neel Kashkari and Atlanta Fed President Raphael Bostic.
- Germany is releasing January inflation data, delayed from last week, on Thursday, which economists expect to accelerate again and the UK is releasing GDP data on Friday, which is expected to show that the economy flatlined in the fourth quarter, narrowly avoiding a recession.
- After a majority of central banks decided on rates last week, Australia, where inflation hit its highest level in 33 years, will decide on rates this week.
Day:
Impact:
Restrictions:
Description
Instrument
Dates
GMT +2
Forecast
Previous
Add event to calendar
Error: Your Requested widget "FTMO Start Challenge " is not in the widget list.
- [do_widget_area av_blog]
- [do_widget_area av_everywhere]
- [do_widget id="categories-6"]
- [do_widget id="categories-4"]
- [do_widget id="categories-7"]
- [do_widget id="newsbox-3"]
- [do_widget id="recent-posts-4"]
- [do_widget_area av_footer_1]
- [do_widget id="text-8"]
- [do_widget id="text-13"]
- [do_widget id="text-14"]
- [do_widget id="text-12"]
- [do_widget id="text-16"]
- [do_widget id="text-18"]
- [do_widget id="text-20"]
- [do_widget id="text-23"]
- [do_widget_area av_footer_2]
- [do_widget id="nav_menu-19"]
- [do_widget id="nav_menu-26"]
- [do_widget id="nav_menu-20"]
- [do_widget id="nav_menu-21"]
- [do_widget id="nav_menu-22"]
- [do_widget id="nav_menu-23"]
- [do_widget id="nav_menu-24"]
- [do_widget id="nav_menu-25"]
- [do_widget_area av_footer_3]
- [do_widget id="nav_menu-4"]
- [do_widget id="nav_menu-27"]
- [do_widget id="nav_menu-10"]
- [do_widget id="nav_menu-11"]
- [do_widget id="nav_menu-9"]
- [do_widget id="nav_menu-13"]
- [do_widget id="nav_menu-15"]
- [do_widget id="nav_menu-17"]
- [do_widget_area av_footer_4]
- [do_widget id="nav_menu-5"]
- [do_widget id="nav_menu-28"]
- [do_widget id="nav_menu-8"]
- [do_widget id="nav_menu-7"]
- [do_widget id="nav_menu-6"]
- [do_widget id="nav_menu-14"]
- [do_widget id="nav_menu-16"]
- [do_widget id="nav_menu-18"]
- [do_widget_area av_pages]
- [do_widget_area eckb_articles_sidebar]
- [do_widget_area eckb_articles_sidebar_2]
- [do_widget_area eckb_articles_sidebar_3]
- [do_widget_area footer-ftmo-left]
- [do_widget id="text-10"]
- [do_widget id="text-11"]
- [do_widget id="text-9"]
- [do_widget id="text-15"]
- [do_widget id="text-17"]
- [do_widget id="text-19"]
- [do_widget id="text-21"]
- [do_widget id="text-24"]
- [do_widget_area footer-ftmo-right]
- [do_widget_area post-loop-footer-author]
- [do_widget id="text-2"]
- [do_widget id="text-4"]
- [do_widget id="text-3"]
- [do_widget id="text-5"]
- [do_widget id="text-6"]
- [do_widget id="text-7"]
- [do_widget id="text-22"]
- [do_widget id="text-25"]
- [do_widget_area tet]
- [do_widget id="nav_menu-2"]
- [do_widget_area widgets_for_shortcodes]
- [do_widget_area wp_inactive_widgets]
- [do_widget id="custom_html-18"]
- [do_widget id="recent-comments-2"]
Disclaimer
All information provided on this site is intended solely for the study purposes related to trading on financial markets and does not serve in any way as a specific investment recommendation, business recommendation, investment opportunity, analysis or similar general recommendation regarding the trading of investment instruments. The content, in its entirety or parts, is the sole opinion of FTMO and is intended for educational purposes only. The historical results and/or track record does not imply that the same progress is replicable and does not guarantee profits or future profitable trading records or any promises whatsoever. Trading in financial markets is a high-risk activity and it is advised not to risk more than one can afford to lose!
