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Another volatile day across the markets – countdown to CB releases

Another volatile day as we are nearing the Fed's next move on Wednesday.

The major US market indexes surged on Tuesday as investors gained confidence in the Fed’s offensive strategy to curbing inflation a day before the Fed’s crucial policy meeting. The Dow’s advances were capped by falls in Caterpillar and McDonald’s shares following the release of their respective quarterly reports. McDonald’s fell 1.52% in the red, while Caterpillar dropped by more than 3.5%

More to read: DAX unmoved by German macro disaster – why the index did not move?

According to data from the Labor Department, labor expenses climbed at their slowest rate in a year during the Q4 as pay growth slowed. The US central bank is likely to increase the federal rates by 25 basis points on Wednesday, following a period in 2022 in which it aggressively raised rates to combat surging inflation.

The Dow Jones closed in the green 0.68%, to 33,945.24, while the S&P 500 closed up with 37.97 points, or 0.95%, to 4,055.74. Nasdaq Composite climbed 137.22 points, or 1.2%, to 11,534.04.

US dollar enjoys high volatility

Risk aversion supported to the US dollar’s rise during the first part of the day. Due to higher oil prices, the CAD was the best competitor to the US dollar, while the sterling did the worst. USD/CAD has stabilized at the 1.3300 level, while GBP/USD is in the region of 1.2330.

The EUR/USD pair hit the 1.0800 price region before settling at about 1.0860 for the day marking a 0.16% rise to the green. The Euro Zone’s GDP during the fourth quarter increased at an annualized rate of 1.9%, above the 1.8% expected by financial markets. In December, German retail sales fell 5.3% month-over-month, which was far worse than anticipated.

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The AUD/USD reached a low of 0.6983, following the release of poor Australian data in the morning. Later, the pair rebounded to finish the day flat towards the 0.7050 region. Currently, the USD/JPY exchange rate is approximately 130.15 which puts it 0.2% in the red.

Volatility marks the commodities as well

Tuesday was a particularly volatile day for the gold price as well, as markets prepared for the Fed’s monthly meeting at the end of the month. Despite rising interest rates, the greenback and treasury yields are decreasing, causing the gold price to advance for a third consecutive month. Silver futures for March delivery rose 0.17% while gold is touching the $1930 barrier with a 0.23%

Oil was marked by volatility as well. Brent futures for the second month closed at $85.58 per barrel, an increase of 1.3%, and West Texas WTI oil March contracts settled in the green, taking a look at the psychological $80 mark at $79.07 per barrel, or 1.5%.

Tomáš is a financial reporter with US markets as his main field. Tomáš is an aspiring author and entrepreneur aspiring to help people get better in financial knowledge.


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