Market Update by Solidecn.com

[Solid ECN]

Euro Stability Amid ECB Rate Cut Speculation



The euro stayed near $1.077, avoiding a recent low of $1.072 from February 5th, as market expectations for early European Central Bank (ECB) rate reductions cooled. This shift followed cautious statements from several ECB officials about easing financial policies. The likelihood of an ECB rate cut in April dipped below 50% after key figures like Philip Lane, the chief economist, and Pierre Wunsch, the head of the Belgian central bank, stressed the importance of confirming that inflation is moving towards the 2% goal before slashing interest rates.

Moreover, ECB member Robert Holzmann mentioned the possibility of not cutting rates at all this year or maybe just at the end. On another note, the US dollar gained strength from strong jobless claims data, suggesting the Federal Reserve might proceed cautiously with any policy changes.

[Solid ECN]

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[Solid ECN]

Pound Steady Amid UK, US Rate Cut Speculations


Solid ECN - The British pound remained stable at $1.26, recovering from a seven-week low of $1.2515 on February 5th. This stability comes as investors recalibrated their expectations for imminent interest rate reductions in the UK and the US, prompted by careful comments from officials in both nations. Sarah Breeden, the Deputy Governor of the Bank of England, hinted at a new approach focusing more on maintaining the current interest rate levels instead of planning further hikes, suggesting the bank is not hurrying to lower rates.

Huw Pill, the chief economist, mentioned that no potential rate decrease is expected soon, highlighting that the decision to ease monetary policy will depend on timing. Recent RICS and Halifax data show the UK's housing market is strong. Earlier in the month, UK officials decided to keep interest rates at their highest in nearly 16 years, with hints that reductions might be considered later in the year.

[Solid ECN]

Euro Rises Amid Rate Cut Cautions: ECB & Fed Update



Solid ECN - The euro experienced a slight increase, going over $1.075, following a drop to a low of $1.072 on February 5th. This happened as the major central banks in Europe and the US took a careful stance on reducing interest rates. During a Financial Times interview on Wednesday, Isabel Schnabel, a member of the ECB's board, stressed the need for patience in deciding on changes to interest rates.

She pointed out the risk of inflation rising again as a concern. Additionally, ECB survey results showed that Eurozone consumers expect inflation to be at 3.2% over the next year as of December, the lowest expectation since February 2022. In the US, the anticipation for the Federal Reserve to lower interest rates soon diminished. This change in outlook was influenced by cautious remarks from Federal Reserve officials and the emergence of robust economic data.

[Solid ECN]

Canadian Dollar Falls Amid US Economic Strength


The Canadian dollar dropped beyond 1.35 against the US dollar in early February, reaching its lowest point in over four weeks. This decline was influenced by solid economic reports from the US and firm statements from the Federal Reserve, which suggested that high interest rates in the US might persist, boosting the US dollar's strength. The ISM PMI indicated that service sector activity in the US was more substantial than expected in January, with high inflation levels, aligning with Federal Reserve Chair Powell's remarks that it's too early to claim success in controlling inflation.

On the other hand, Canada's PMI data showed its private sector shrinking, highlighting the need for the Bank of Canada to adopt a more supportive monetary policy. Additionally, oil prices were low due to speculation about a possible ceasefire between Hamas and Israel, which lessened worries about oil supply issues and decreased the flow of foreign currency, weakening support for the Canadian dollar, also known as the loonie.

[Solid ECN]

Silver Prices Dip Amid Fed Rates & Demand Outlook


Silver prices fell below $22.5 for each ounce, marking the lowest point in two weeks. This drop was mainly because the hope for lower Federal Reserve interest rates diminished. Jerome Powell and other officials emphasized that any reduction in interest rates would be gradual and unlikely to start in March. Furthermore, recent U.S. jobs and services data, which was better than expected, suggested that the cost of borrowing might remain high until late spring. This situation made investments that don't produce income, like silver, less attractive.

However, silver did see some positive momentum from the anticipation of more support for China, the biggest consumer of silver, and the forecast of rising demand throughout the year. The Silver Institute's latest report predicted that the global demand for silver would hit 1.2 billion ounces in 2024, making it the second-highest demand level ever recorded, mainly due to industrial purchases.

[Solid ECN]

Gold Price Stable as Fed Rate Cut Chances Dip



Solid ECN - Gold's price stabilized above $2,030 per ounce on Thursday, supported by decreases in dollar and Treasury yields. This situation arose as investors waited cautiously for upcoming talks from US Federal Reserve officials, looking for hints about future monetary policy directions. However, the expectation for a reduction in interest rates was tempered by unexpectedly strong US employment and services data and strong statements from Fed Chair Jerome Powell.

In a recent interview, Powell confirmed that a rate decrease in March is not likely, echoing his earlier remarks following the FOMC meeting. He also mentioned that the Federal Reserve plans to reduce rates more slowly than investors might anticipate. Currently, the likelihood of a rate cut by the Fed in March is perceived to be below 20%, a sharp decline from the two-thirds probability expected at the beginning of the year.

[Solid ECN]

Dollar Index Stabilizes; Fed Rate Cut Odds Dip


Solid ECN - The dollar index hovered around 104 on Thursday, decreasing for two consecutive days. This happened as investors analyzed recent comments from Federal Reserve officials to understand future interest rate changes. The Boston Fed President Susan Collins mentioned that the Federal Reserve cautiously evaluates the latest data and forecasts. She indicated that adjusting the policy might be suitable later this year.

Currently, the market expects a less than 20% possibility of a rate decrease by the Fed in March. This expectation has significantly dropped from the beginning of the year when it was closer to two-thirds. Investors are now waiting for new data on jobless claims this Thursday to check the state of the job market. While the dollar maintained its recent downturn against most major currencies, it performed well against the Japanese yen.

[Solid ECN]

Aussie Dollar Rises Amid Rate Hike Warnings


Solid ECN - The Australian dollar climbed past $0.65, recovering from lows not seen in 11 weeks. This happened after the Reserve Bank of Australia decided not to change interest rates, a move many anticipated. However, the bank also hinted at raising rates if high inflation continues. It noted that inflation dropped more than foreseen in the last quarter, yet it's unclear when it will stabilize within the desired 2-3% range. Australia's inflation rate was 4.1% year-over-year in the last quarter, a decrease from 5.4% the previous quarter and lower than the predicted 4.3%.

The monthly inflation rate decreased to 3.4% in December from November's 4.3%, not meeting the expected 3.7%. Despite these figures, the Australian dollar is still feeling the heat from a strong U.S. dollar, bolstered by positive economic data from the U.S. and the Federal Reserve's firm stance, which has made people less hopeful for a rate decrease.

[Solid ECN]

UK Pound Stabilizes Amid Interest Rate Talks


Solid ECN - The British currency stabilized at around $1.26, staying near its seven-week low point of $1.2515 from February 5th due to the strong US dollar. This happened as investors soon became less optimistic about the US reducing interest rates. Similarly, expectations for a quick interest rate reduction by the Bank of England were dialed down after Chief Economist Huw Pill mentioned that a rate decrease was not imminent, describing it as inevitable but not immediate.

In February, UK interest rates remained at their highest in nearly 16 years, with a notable voting difference: two members favored increasing rates, whereas one was for reducing them. The likelihood of the Federal Reserve cutting rates by May is seen as over 50%, with the Bank of England expected to do the same by June.