Market Update by Solidecn.com

[Solid ECN]

Dollar Index Stays Strong as Fed Dims March Rate Cut Hopes



Solid ECN - The dollar index remained stable above 103.5 on Thursday, staying close to its highest point in seven weeks following comments from Federal Reserve Chair Jerome Powell that diminished expectations for an interest rate decrease in March. During the Fed's press briefing, Powell indicated that lowering rates in March did not align with the central bank's primary scenario and emphasized the importance of keeping rates steady until there's significant evidence that inflation is on a downward path to the 2% goal.

The Fed's likelihood of a rate reduction in March has decreased sharply to 38% from 89% just a month earlier. Investors are now paying attention to the upcoming weekly unemployment claims, the ISM PMI data on Thursday, and the eagerly awaited monthly employment report on Friday. While the dollar gained strength against most major currencies, it saw a decline against the Japanese yen. This shift was primarily due to concerns surrounding New York Community Bancorp, a regional bank in the U.S., which led investors to seek more secure assets.

[Solid ECN]

US Gas Futures Hit 9-Month Low: Why?



Solid ECN - The value of US natural gas futures has dropped to a nine-month low, falling under $2.1/MMBtu. This decrease is attributed to diminished demand and an upsurge in supply. The demand for heating is projected to decline further due to the forecast of above-average temperatures lasting until February 7th. In the meantime, gas production is on a recovery path following disruptions caused by a recent Arctic storm.

Current data indicates that gas storage levels are 5.2% above the typical seasonal average. Concurrently, it’s anticipated that US LNG feed gas won’t reach its peak levels until mid-February when the Freeport LNG export facility in Texas is expected to be fully operational again.

[Solid ECN]

WTI Oil Prices Fluctuate Amid Fed Decision


Solid ECN - On Wednesday, West Texas Intermediate (WTI) crude oil futures decreased, settling near $77.5 a barrel. This decline partly reversed the gains from the prior session and mirrored the downturn in other volatile investments, as a cautious mood prevailed in the marketplace. Market participants were also cautiously anticipating the U.S. Federal Reserve's upcoming monetary policy announcement, with recent economic indicators diminishing expectations for reductions in interest rates.

Additionally, recent data revealed a continued contraction in Chinese manufacturing for the fourth consecutive month in January, pointing to persistent weak demand from the world's leading oil importer. Despite these factors, crude oil prices received some support due to concerns over escalating geopolitical tensions in the Middle East. This follows a recent lethal drone strike on American forces near the Jordan-Syria border. President Joe Biden of the United States acknowledged that the decision to respond to the incident was made. However, he withheld specifics to prevent a broader conflict in the region.

[Solid ECN]

Silver Prices Hold Steady Around $23 Amid Geopolitical Tensions.



Solid ECN - Silver values have remained stable, hovering around $23 per ounce. This stability comes as investors maintain a cautious approach in anticipation of the upcoming Federal Reserve meeting and significant economic reports from the United States, including the crucial employment data. Market participants are keenly observing for indications of a slowdown in the job market and a potential shift towards a more dovish stance by Federal Reserve officials, following signs of easing in core PCE inflation, which suggests a reduction in inflationary pressures.

In the meantime, silver's status as a reliable safe-haven investment is reinforced by increasing geopolitical uncertainties in the Middle East. Recent events include the death of three American military personnel in northeastern Jordan, resulting from a drone strike, as well as ongoing assaults on commercial shipping in the Red Sea, which continue to keep the markets vigilant.

[Solid ECN]

Gold Prices Hold Steady at $2,030 Amid Fed Rate Decision Anticipation.



On Wednesday, gold prices hovered at approximately $2,030 per ounce, maintaining a consistent trading pattern as market participants awaited the US Federal Reserve's decision on monetary policy. Expectations are high that the Fed will keep current interest rates. Key attention is on Fed Chair Jerome Powell's upcoming comments for indications of possible rate cuts within the year.

Nevertheless, more robust than anticipated, recent US economic data has lessened enthusiasm for potential rate reductions, exerting pressure on gold prices. Current market predictions indicate a below 50% likelihood of a Fed rate cut in March, a decrease from the 73% probability noted at the beginning of the year, as per CME's FedWatch Tool. Additionally, investors are exercising caution due to escalating geopolitical tensions in the Middle East, especially after a recent lethal drone strike on US forces near the Jordan-Syria border.

[Solid ECN]

NZDUSD Nears Key Fibonacci Levels, Bearish Trend Intact



The NZDUSD pair trades around 0.611, corresponding to the 23.6% Fibonacci support level, and is inside the Ichimoku cloud. The RSI indicator has returned from the 80 level, indicating that the downtrend will likely continue. The 38.2% Fibonacci resistance level further supports the bearish trend.

If the NZDUSD price remains below this level, the next target could be the recent lower lows at 0.60618, followed by the lower band of the bearish flag.

[Solid ECN]

Australian Dollar Rises to $0.66 Amid Anticipation of GDP Report.



The value of the Australian Dollar has increased to approximately $0.66, offsetting its recent downturn. This change occurs as market participants eagerly anticipate Australia's GDP report for the fourth quarter, a significant precursor to the Reserve Bank of Australia's meeting scheduled for February 5th. Recent statistics indicate a larger-than-anticipated drop in Australian retail sales for December, attributed to consumers accelerating their holiday shopping to November, motivated by Black Friday sales.

Concurrently, the Australian Dollar faces ongoing challenges. Strong economic figures from the US and assertive comments from its central bank officials have heightened the anticipation that the Federal Reserve may maintain its current interest rate stance in the near term. Additionally, despite new economic measures in China, Australia's primary trading partner, the Australian currency has struggled to maintain momentum. This is partly because the Australian Dollar is often seen as a direct indicator of the Chinese yuan's performance.

[Solid ECN]

Stable GBP Awaits BoE Meeting; Rate Cut Odds Surge


Solid ECN - The British currency has found stability above $1.27 as market participants anticipate the Bank of England's initial policy meeting of 2024, scheduled for later this week. Current market consensus indicates that the bank rate is unlikely to change. However, investors will pay close attention to how the committee members cast their votes and the details of the statement that follows. During their last meeting in December, three members favored raising the rate by 25 basis points, hinting at the possibility of future policy tightening.

Yet, recent economic indicators, including lower-than-expected inflation and declining wage growth, hint at a potential shift in the central bank's next steps, possibly toward reducing borrowing costs. Current market predictions suggest a 42% chance of a rate reduction in May, with the likelihood increasing to 74% by June.

[Solid ECN]

Euro Hits Low as ECB Rate Cut Looms, Recession Fears Rise


Solid ECN - The euro has recently fallen to its lowest point since December 12th, dipping close to $1.08. This decline is partly attributed to expectations of a rate reduction by the European Central Bank (ECB), potentially by 25 basis points as early as April. Upcoming GDP figures are likely to indicate a recession in the Eurozone for the final quarter of 2023, and a decrease in the inflation rate is expected for January. ECB officials, including de Guindos, Centeno, and Kazimir, have hinted at a probable interest rate cut shortly.

However, they have not provided specifics about the timing or conditions that would prompt such a decision. Recently, the ECB maintained its historically high-interest rates. President Lagarde noted it was too soon to consider rate cuts for the Eurozone while acknowledging that the economic growth outlook remains predominantly negative.

[Solid ECN]

Mexican Peso Recovers Amid Inflation Data and US Dollar Dip



Solid ECN - The Mexican peso has shown resilience, approaching the 17.2 level against the US dollar, recovering from a low in late January. This upturn is mainly due to the latest inflation figures from Mexico and a dip in the US dollar's strength. Market players had initially hoped for a more lenient approach from Mexico's central bank (Banxico). Still, higher-than-forecasted inflation rates checked these expectations in mid-January, which registered at 4.9% against an anticipated 4.78%, which rose from December's 4.46%.

In contrast, the Mexican economy is showing signs of vulnerability under stringent monetary policies, with economic activities in November shrinking by 0.5% month-on-month, a more-than-expected decline, and an increase from the previous month's figures. Concurrently, the US dollar's support has waned due to diminished prospects of early interest rate reductions by the Federal Reserve in 2024, following encouraging preliminary data from S&P Global on manufacturing and service sectors.​