Financial markets around the world remain euphoric. The U.S. dollar’s decline continues, fueled by the move higher in equities and commodities.
The Fed’s Chair, Jerome Powell, testified twice this week, on Tuesday and Wednesday. His remarks were enough to send the stock market close to the highs and, in some cases, to new all-time highs. Basically, he reiterated the Fed’s willingness to let the accommodative measures in place and to continue easing the monetary policy via the quantitative easing program.
Some market participants started to price in a possible tapering of the purchases because the bond yields in the United States started to rise. The Fed downplayed the scenario, and Dow Jones traded yesterday above 32,000 points for the first time ever.
European indices opened today higher as well, on the back of the price action seen in America yesterday, albeit the picture looking mixed at the moment of writing this article. As such, the Spanish index is up 1.25%, the Dax is flat, and the FTSE 100 trades lower -0.3%.
On the commodities front, crude oil moved above $63 while copper keeps making new highs. Once again, the weakness in the dollar pushes assets to new highs.
The only interesting piece of economic data today comes from the United States – the Preliminary GDP, released quarterly. However, it is usually secondary in importance after the Advanced GDP, as the actual rarely differ from the forecast. Should we see a difference, the market may react.
The unemployment claims in the United States may offer a clue as to what to expect next Friday when the February NFP data will be released. Judging by the optimism in the markets and the price action, it appears that the market believes in strong labor data for the month.
Until then, there are still two trading days left in the month and the end of the month flows are critical. All eyes are on the U.S. dollar to see if it reverses, or will the squeeze continue into March?
Markets to Watch
S&P500, gold, and USDJPY – markets in focus today
Stocks remain bid, especially after the Fed’s intervention. While the Dow Jones made a new all-time high, the S&P500 did not. The broader index suffers from Tesla’s recent rout as the electric vehicle maker dropped over 20% in a couple of days before recovering some of the losses yesterday. Tesla entered the S&P500 late last December and has a big influence on the index’s movement. Levels to watch – 4,000 to the upside, 3,800 to the downside.
Gold does not join the party seen in financial markets. In fact, it continues to trade with a bearish tone inside of a declining channel. Is gold telling us something, or it is simply lagging the recent move lower in the dollar?
The USDJPY pair did what it was supposed to do while in a bullish channel – it bounced from support, despite general dollar weakness and now threatens to move above 106.50.
Winners and Losers
AUD and EUR lead the gains against the dollar, while the American currency’s decline continues.