The Federal Reserve would not commit to ending hikes after the Federal Fund Rate increases above 5.25%. Even though the chairmen would not commit, he did hint at this potentially being the last interest hike. The federal fund rate has been at its highest since 2007 and the banking crisis. According to Moody, most economists are certain the Fed will not hike again over the next few months unless something unexpected happens to inflation. Most economists drew on the chairmen’s comments saying, “we need a few months of data” to determine if interest rates are restrictive enough. So how did global instruments react to the development?
Gold increased to a new all-time high, reaching just over $2,078 as investors abandoned the US Dollar. The US Dollar Index declined from 101.75 to 101.08 and is down this morning by 0.26%. The decline is directly related to the weak interest rate hike and indicates interest rates are not rising further. For this reason, investors opted for Gold and bonds as their safe haven assets. J.P. Morgan, UBS, and Morgan Stanley have already stated they will turn to the bond market. The European Central Bank is also expected to follow the Fed, hiking 0.25% this afternoon.
XAU/USD - Gold Skyrockets to New Heights
The price of Gold significantly increased during the US trading session, climbing almost 1.30%. The price opened on a 1.10% bullish price gap and rose to $2,078. However, as the price became significantly higher than previous price ranges and oversold, the price started declining. Today's price is declining by 1.22%, forming a full correction of the previous price gap.
The bullish price movement is about the dovish tone of the Federal Reserve, which means investors are not likely to see a higher return on their investments. As a result, investors are searching for alternative investments which tend to hold their value during adverse market conditions. Investors want to protect their assets against a recession, just in case the Fed cannot navigate a soft landing. As mentioned above, investors are turning to Gold and Bonds in the “safe haven” category.
According to the Chicago Mercantile Exchange and the US Commodity Futures Trading Commission, the number of positions on Gold significantly increased yesterday. Traders of Gold will also monitor the price movement of the US Dollar, which is currently declining against most currency pairs. If the US Dollar weakens, the price of Gold may continue to be supported by demand. The next major event for Gold will be tomorrow’s US employment data.
Regarding technical and price analysis, the main concern for investors is the current high price. The high price can change the psychology of investors, who may be reluctant to continue purchasing at such a high price. However, this may change if investor sentiment significantly declines. Indicators, such as regression channels and moving averages, indicate a bearish retracement but a strong price going forward.
NASDAQ - The Fed Hikes 25 Basis Points
Over the past 24 hours, the NASDAQ saw a significant temporary selloff as the Fed’s rate decision approached. This shows investors' unwillingness to participate in the market during the event. However, the price has increased by 0.60% since the Chairmen’s press conference and continues to rise during this morning’s futures market. Nonetheless, the price continues to follow a downward trend pattern. Over the next two days, investors will concentrate on Apple’s earnings report and tomorrow’s US employment data.
The stock market is known to be supported by a dovish central bank. However, investors are still cautious that interest rates are in the “restrictive zone”. The stock market's performance will depend on how resilient the economy and consumer demand is to the high-interest rates. Investors tonight will monitor Apple’s quarterly earnings for the first quarter of 2023. Wall Street expects earnings per share of $1.44 and Revenue of $92.84 billion. This is slightly lower than the previous quarter but is normal, considering the last quarter included increased Christmas-related spending. Apple is the second most influential company within the NASDAQ.
Investors will also be monitoring any comments from the board on the next quarter’s expected performance, AI, and the company’s new savings product.
Summary:
- The Federal Reserve would not commit to ending hikes after the Federal Fund Rate increases above 5.25%.
- Most economists drew on the chairmen’s comments saying, “we need a few months of data” to determine if interest rates are restrictive enough.
- Gold increased to a new all-time high, reaching just over $2,078 as investors abandoned the US Dollar. Many investors are turning to alternatives in case the Fed is unable to guarantee a “soft landing”
- The NASDAQ increases in value during this morning’s futures market. However, investors turn to Apple’s earnings report this evening.
