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Fed’s Powell speech fuels Tuesday’s trading – disinflation action?

Jerome Powell, the president of Fed, commented on the Central Bank's decision to hike 25 points last week. Still, a few hikes are expected.

Wall Street’s major indexes advanced on Tuesday, with the S&P 500 and Nasdaq gaining more than 1% in response to less hawkish-than-anticipated remarks from Fed’s Jerome Powell. Expressing that some hikes are still needed to get to the target inflation level. He also stated he anticipates “substantial decreases in inflation” in 2023. The Fed hiked rates by 25 points last week, and the markets are now pricing in a peak rate over 5% in light of Friday’s employment report for January.

The other major central banks hiked the rates as well, however by a more drastic 50 points. Dow Jones 0.75 %, to 34,144.70. The S&P 500 was up 48.93 points, or 1.19%, to 4,160.01, and Nasdaq was up 207.82 points, or 1.75% to 12,095.27.

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Dovish talks are not very suited for the US dollar’s wellbeing. The greenback fell from one-month top after said speech. The dollar fell against all major currencies, driven by losses against the yen, swiss franc, and the aussie.

The dollar index, which gauges the US dollar versus a set of six other currencies, slipped on Tuesday. Finally closing 0.19% in the red at 103.295. After plunging to a low not seen for five weeks at 1.0670, the euro closed flat at 1.0725 with a 0.08% decline. The dollar fell 1.2% against the yen, falling to 131.

After falling to 1.1974, a low not seen for a month, against the dollar in the previous session, the pound rose marginally to 1.2031with the closing bell. The AUD/USD gained a healthy 1% to close at 0.6946.

Commodities enjoy Fed’s comments

Oil prices increased by more than 3% on Tuesday after the market fears over interest rate rises have been calmed by Powell. A recovering Chinese demand also helped oil for a green close.

Brent oil futures increased 3.64%, to $83.94, just a hair below the $84 mark, per barrel. the US benchmark West Texas Intermediate crude futures increased 4.4%, to $77.38 per barrel, slowly closing in on the psychological $80 mark.

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During the first part of the trading day, spot gold was rather inactive. The yellow metal consolidated recent losses just over the $1,860.00 mark. As caution prevailed ahead of the speech, XAU/USD maintained flat levels, closing barely in the green with a 0.11% rise. On the other hand, silver futures for March delivery ended the day in the red with a 0.26% decline to $22.183. 

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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