Exploring highlights and trends from global markets, dive with us into the latest economic updates and their impact on investing. From FOMC speeches to developments in the gold and Euro/USD markets, stay on top of the opportunities and challenges shaping today’s financial landscape.
What a week! Starting with monetary policy decisions, we had the president of the ECB, Christine Lagarde, stating that the next interest rate change will be a cut, although she did not commit to saying when. Jerome Powell, president of the American Central Bank, also did not want to commit and was even a little more rigid in his speech. According to Powell, “We are in risk management mode, between changing interest rates too early or too late.” Powell also stated that there was no proposal to cut interest rates at this last meeting and that FOMC members are very divided on the deadline.
It is worth remembering that the majority of market bets were that the first US interest rate cut would be at the next meeting in March and, after this speech, this bet was postponed to the May meeting, where there is no longer much certainty given the data of Payroll.
Payroll surprises
The January Payroll surprised everyone, generating 353 thousand new job openings, compared to an estimate of 180 thousand – practically double! This was yet another shower of cold water in the expectation of an interest rate cut soon. After all, with such a heated job market, it exposes the strength of the American economy and could hinder the plan to bring inflation to the 2% target. Such disparity in data ended up stressing the markets, causing the DXY contract to rise 0.85% and dropping the XAUUSD gold contract by 0.75%.
US President Joe Biden commented on the payroll numbers, saying that the country’s economy is the strongest in the world and that was proven by another month of strong wage gains and job growth in January, continuing the strong performance last year. The former president and current candidate for the next elections, Donald Trump, accused Jerome Powell of “political bias” and said he would replace him if elected. According to Trump, the FED will cut interest rates to help Democrats in the election. Remembering that, by cutting interest rates, the economy tends to unlock, as it creates a run on risky assets.
Speaking of risk assets, even with this not so favorable scenario, the S&P500 renewed a new high, rising more than 1% last Friday. We are in earnings release season, and technology companies have impressed with their results. The big highlight is Meta, which rose 20% on Friday and paid its first dividend in history! CEO Mark Zuckerberg alone received $700 million in dividends, which were distributed at 50 cents per share. Meta also announced that it intends to distribute dividends quarterly.
Banking Crisis
The banking crisis returned to haunt the markets after the New York Community Bank suffered a severe sell-off and devalued more than 40% last week. Economists are still assessing the risks of contagion to find out whether it is a one-off or a broader problem.
Gold Analysis
The XAUUSD gold contract broke the graphic figure and confirmed the breakout. However, the upward movement was interrupted by Payroll data, bringing down the contract, with LTB as support. From here, the price tends to enter caution mode, as it absorbs new expectations from FOMC members regarding interest rate cuts.
Euro/USD Analysis
The EURUSD pair had been working within a graphical figure (descending triangle) and between the 50- and 200-period moving averages of the daily chart. On Friday, it broke the 200-period moving average. For the week, we will be keeping an eye on support and LTB, waiting for some macro factor that could drive a breakout. Remembering that the trend is downward.
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