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Markets sees Powell comments as dovish

Good morning


Feds Powell spoke on Friday, overall said nothing particularly new, will tighten further if needed although for now policy is restrictive and the full effects of previous rate rises are yet to be fully felt. The US Dollar had brushed off earlier weak PMI numbers but despite Powell adding that it was far too early to be talking of easing, the market took his comments as dovish and sent USD lower, with GBPUSD moving almost 100 pips higher from 1.2625 to test as high as 1.2725 overnight, while EURUSD traded up from 1.0830 to within a few pips of 1.0900. GBPEUR is up at three month highs, trading as high as 1.1675 this morning.


The US dollar selling seen since markets reopened last night seems to be in part down to price action in gold, which traded up from a close around $2070 to reach new all-time highs of $2150, a move which as yet has not been well-explained although to me it smells of short positions being closed out. Other suggestions are that the gold buying was a safe-haven play as reports of a possible attacks on a US warship and three commercial ships in the Red Sea came to light. As I type we are back at $2065. The move happened in illiquid markets overnight, as such the reported highs do differ, some suggest it only reached as high as $2135.


A lot of talk though that gold could see new highs through 2024 and 2025, UBS in particular are pretty bullish, especially if Fed do start lowering interest rates. It does cost a lot to hold a long gold position, with spot around $2065 the one year forward is nearer $2175. This doesn’t necessarily make it bad value but one would have to be very confident of a move higher to go long at these levels.


Turkish inflation was released this morning, coming in lower than expected at 62%. USDTRY is just a smidge under 29.00. That’s a pretty terrifying inflation number. I do remember looking at upside EURTRY many years ago, at the time it was difficult to be long given the forward points were so much against you. It was around 3-4.00 back then. Now it’s trading around 31.50. Just shows that some things can be worth buying even if the forward points are heavily agaisnt you.


Regular readers will know I rarely talk of Bitcoin but I do feel obliged to report that is has shifted back above $40,000, indeed it now trades at $41,600, the highest level since April 2022. One year ago Bitcoin was down at $17,000 or so, I have managed so far to avoid anyone who has claimed to have bought it down there, I’m sure instead many holders of Bitcoin are now reporting smaller losses on their holdings which they probably got into a couple of years ago and have been sitting on ever since.


Quite a big week for AUD, we have the latest RBA rate announcement in the early hours of tomorrow morning, followed by the latest Aussie GDP reading the next night. GBPAUD did test lower to 1.8970 overnight when gold was moving around but is now back up to 1.9070 which is very close to the middle of the trading range we have seen since late-Sept.


We have some reasonable data to look forward to this week, US services ISM tomorrow, EU retail sales and BoC rate announcement Wednesday and EU GDP Thursday, but the focus will be on US employment numbers which comes in the form of JOLTS data tomorrow, ADP Wednesday, initial claims Thursday and then the nonfarm payrolls Friday.


Spurs were involved in another thrilling match and benefitted once again from a rather odd refereeing decision in their 3-3 draw with Man City. An unlikely result given the team is still facing many injuries, but wit City dropping points, this season could be a really interesting title race with just four points separating the top four teams.


Have a good day and stay warm. We’ve seen none of the snow that some parts have had although I did have to smile when I saw a headline about a major incident being declared after snow in Cumbria which, to my eye, looked like just a couple of inches. We had a couple of thick frosts and its still cold now although we’re out of the minus numbers. Back to cold, wet miserable winter weather.


- 09.30 EU investor confidence

- 11.10 ECBs Elderson speaks

- 14.00 ECBs Lagarde speaks

- 15.00 US factory orders

- 23.30 Japan Tokyo CPI

- 00.01 UK BRC retail sales

- 01.45 China caixin services PMI

- 03.30 RBA rate announcement


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