Wall Street closed strongly in the green with Powell’s speech
The pace of rate increases will likely slow down, according to Federal Reserve Chairman Jerome Powell. He also noted the peak level of rates will be higher than anticipated because there is still much work to be done to stifle above-trend inflation.
More than 70% of traders predict that the Fed will reduce rate increases from the 75 basis points observed in the last four Fed meetings to 50 basis points in December. Traders are also expecting new labor market data due on Friday. It is anticipated to show that unemployment in November increased as more people entered the job market.
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Following the announcement of Powell’s comments, the Nasdaq extended gains and the S&P 500 rebounded from an earlier drop. The benchmark S&P 500 index is on track to post gains for a second consecutive month. After trading much lower in the morning session, the Dow Jones Industrial Average increased by roughly 1.3%. Even though indices are up, Nasdaq has lost nearly 29% so far in 2022, while the S&P 500 is still down roughly 16%.
Apple increased 3.4% in afternoon trading, while Nvidia increased 5.5%. Finally marking a 4.86% and a massive 8.24% increase respectively with the session close. Tesla Inc. shares also increased strongly by 7.67%. This happened after China Merchants Bank International reported that price reductions and incentives offered on Tesla’s Model 3 and Model Y helped improve sales in China in November.
Bad day for the dollar
As US Federal Reserve Chair Jerome Powell gives a dovish speech, the EUR/USD has pared intraday losses and is trading above the 1.0400 level. Earlier today, EUR/USD traded below 1.030 for a short time.
GBP/USD traded around 1.2080 also showing a turnaround from trading at 1.190 earlier. The Aussie rallied the most, as AUD/USD trades at 0.680 from 0.668. The USD/CAD is down to 1.3430, while USD/JPY trades at 138.10. We can see the dollar reversing gains across the board.
According to the ADP National Employment report, US private payroll growth in November was much lower than anticipated. This is indicating that demand for labor may have cooled due to rising interest rates. This also means bad news for the dollar. The dollar index added to earlier losses.
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On the other hand, the dollar index quickly curbed some losses as statistics revealed that the third quarter’s gross domestic product growth was 2.9% annualized. This is indicating that the third quarter’s economic recovery was stronger than previously anticipated.
Oil confirmed gains holding hands with precious metals
On Wednesday, oil prices rose by more than $2 a barrel as a result of tighter supply, a falling currency, and hope for a recovery in Chinese demand. Gains are effectively capped by the OPEC+ agreement to conduct its meeting on December 4th. U.S. West Texas Intermediate crude futures increased by $2.35, or 3.01%, to $80.55. Brent crude futures increased by $2.40, or 2.8%, to $85.43 per barrel.
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US bond yields on short durations have increased after lately drifting lower. While the yield on the 2-year UST is only 2 basis points higher at 4.48%, it is 4 basis points higher on the 1-year UST at 4.82%. Gold continues to move with the US dollar and be influenced by US bond yields.
Spot gold traded at 1,769.56 or +19.73, which is a 1.13% increase with the closing bell. Gold futures for February 23rd posted higher gains at 1,769.56 or +19.73 which is 1.13% higher. Silver futures for March 23rd posted the highest gains 22.383 or +0.988 which is 4.62% higher. Copper similarly up 4.07%.
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