Stocks Rally and Dollar Drops on Less Hawkish Fed
The recent trend continued in earnest in global markets yesterday as investors once again focused on more dovish comments from some Fed speakers whilst ignoring anything with a hawkish leaning. The major US indices all rose once again on market optimism that rates have peaked, the Dow closing up 0.24%, with the S&P and Nasdaq adding 0.10% and 0.26% respectively. The dollar took a hit again dropping nearly 0.4% on the index and sending some of the majors to look at levels not seen for the last few months. US Treasury yields also took a dive, the 10-year sinking to its lowest level since September 20. Gold shot much higher, jumping 1.4% on the day on the dollar weakness move but Oil did get a bit of a reprieve from recent falls, climbing over 2% higher.
Data Coming to Back Fed Rhetoric?
US markets jumped again last night as it seemed the Fed is now catching up to market thinking that they have finished with hiking rates and the next move is down. There was a plethora of Fed speakers on the circuit last night and investors jumped on comments from Fed Governor Waller who advised that he was increasingly confident that current rates would prove adequate to bring inflation back to target. Other fed members were not so confident that this would be the case with Fed member Michelle Bowman still thinking that more rate rises were necessary. So, we have a resurgent market jumping on the back of potential rate cuts and a soft landing, and some Fed members slowly changing the rhetoric, but this will need to be backed up by data or things could change fast. And, what better data than the Fed’s well documented preferred inflation number the PCE Price Index which is due out on Thursday. A lower print, and all looks good for investors and the way is open for higher stocks and a lower dollar, but a higher then expected number could really put the cat amongst the pigeons and we could see some sharp corrections across the market.
More Data and Central Banks Ahead Today
As expected, the market has really picked up over the last few sessions, and it’s a full day of event risk ahead again today which should keep traders on their toes. The Asian session sees market focus firmly on the antipodes with the Australian CPI numbers due out shortly before the RBNZ’s latest rate decision – expectation is for them to stand firm and keep rates at 5.50%. The European session sees the release of CPI data from both Germany and Spain which should see some moves in the Euro, and the US session has the release of the latest GDP numbers for the US whilst we also hear from the Bank of England Governor Andrew Bailey.
