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The “Fed may hike more” sentiment continues

Fed continues to be the main US market mover, sparking renewed hiking sentiments. The dollar enjoys the ride.

Inflation is not slowing down as fast as Fed would like

James Bullard of the Fed of St. Louis claimed that inflation expectations are currently quite low and that the economy is improving faster than previously believed. Unemployment is below the long-term average.

He stated that inflation “remains too high,” but noted that it has declined recently, saying that a “disinflationary” movement had started and may continue with more Fed rate hikes.

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US dollar made new weekly highs versus the majority of its key competitors, but lost some ground before Wall Street’s closing bell. US indices rebounded from the initial lows. The cause was United States Production Price Index (PPI), which increased by 6.0% year-over-year in January, dropped below 6.5% in December. The expectation was 5.4%, therefore a miss.

The data rekindled speculation that the Fed will keep the rate of tightening for longer than anticipated. A policy reversal slowly faded farther into the distance. In contrast, US government bond rates increased, with the 10-year now yielding 3.83% and the 2-year yielding 4.63%.

The safe havens keep climbing on Fed fears

Tesla dropped 5.69% today as the manufacturer recalled 362,000 EVs for a self driving software fix. The S&P 500 plummeted 1.3%, while the Dow Jones dropped 1.26%, or 430 points, and the Nasdaq fell 1.78%. 

The EUR/USD trades a little below 1.0700. The GBP/USD fluctuates around 1.2010. USD/JPY peaked at 134.45 with intraday peaks in US rates, and is presently trading at 133.80.

AUD/USD struggles to retake the 0.6900 level after data revealed that Australia’s headline employment move was -11,500 vs 20,0000 expected. Unemployment Rate rose to 3.47% versus 3.45% earlier.

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Gold price dropped with the dollar’s strength earlier, however regained its position with the closing bell. Futures for April delivery plummeted to $1,827.58 per troy ounce, its lowest level since early January during the day, however managed to close in the green 0.04% at $1846.05. Looks like dold is regaining it’s safe haven strength.

With WTI trading at $78.10 per barrel, crude oil prices remained 0.64% in the red. Still, the US crude benchmark managed to recover from a session low of $77.92.

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China’s purchases have traditionally been a catalyst for oil price increases, and this year China is expected to purchase an extra 500,000 barrels per day, accounting for about half of the global oil demand rise in 2023.

Brent oil finished down 0.83%, at $84.67, dipping below the $85 mark. Brent’s intraday low point was $83.88.

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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