Chair Powell and US CPI dominate the week, following a big miss for NFP headline on Friday. Chair Powell tried to cool the Balance Sheet reduction talk and US CPI hit a near 40-year high at 7%.
The Market Week – January Week 2
The start of the New Year saw much more Hawkish Fed minutes, a huge miss for the NFP headline and Omicron cases continuing to climb & hospitals filling up but severity remaining less than previous variants. Chair Powell pleaded his case for a second term by cooling chatter of an immediate reduction in the FED’s balance sheet. Still to come – US Inflation data today, PPI tomorrow and Retail Sales on Friday.
Jobs growth continues to share the headlines, with weekly claims popping over 200k, to 207k, ADP private payrolls a massive beat at 807k vs 400k, but the NFP headline number a disappointment at 199k vs 425k. Elsewhere the data was tight – Unemployment declined to 3.9% and Earnings rose 0.6%.
The vaccine and booster rollout programmes for Omicron continue to focus sentiment. The variant’s transmissibility is testing global health systems, (WHO believe over 50% of Europeans will contract the variant) but the severity of it also appears less than previous variants. More data from South Africa suggests the peak of cases and hospitalizations has been reached.
In FX the USDIndex holds its bid but suffered from Powell’s benign comments, once again testing down to 95.55 from 96.30 highs, while EURUSD rallied to 1.1375 from below the 1.1300 handle. USDJPY dropped from 5-year highs at 116.34 to test 115.00 and Cable continued its late December recovery to breach the 1.3600 level and move to 1.3645 and 10-week highs.
US stock markets had a bout of volatility as key 100-day moving averages were once again tested. The USA500 spiked down to 4,570, the USA30 tested to 35,625 and the USA100 was once again the weakest, testing down to 15,150. All recovered post Powell.
The Gold price spiked to $1824 on Tuesday from lows earlier in the week at $1782. $1830 and $1850 remain key upside resistance areas with $1800 and $1785 support zones. The worries over inflation have not seen the rally in Gold normally expected and its allure as an inflation hedge seems to be waning?
USOil prices continue to be supported by tight supply and low inventories. The key psychological $80.00 a barrel has been breached this week as prices peaked at $81.20. Today’s inventories are expected to show another 2.1 million barrel drawdown, adding to the price pressure.
The yields remain the key driver of the market once again this week, with the US 10-Year Treasury Note breaching as high as 1.80%, significantly above the pivot 1.75% level as Treasuries continue to have their worst start to a new year since 2009. This month’s 10-year Bond Auction is due today; last month it was filled at only 1.52%.
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Stuart Cowell
Head Market Analyst
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Stuart Cowell
Head Market Analyst
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our written permission.
