General Market Analysis 02/02/2024 – IC Markets

US Stocks Rebound After Fed – S&P up 1.25%

US stock markets rebounded well in trading yesterday as investors further digested the impact of the latest Fed rate hold and earnings data came in stronger than expected. The Dow closed up 0.97%, the S&P added 1.25% and the Nasdaq rose 1.3%. US treasury yields dropped again as concerns over US regional banking weighed markets, the 10-year dropped 10.7 basis points to 3.86% and the rate sensitive 2-year lost 2.9 basis points to 4.20%. The dollar also took a hit across the board losing 0.55% on the index and the pound gained after the Bank of England held rates steady but remained relatively hawkish. Oil prices took a hit, dropping over 2% on rumours of a ceasefire between Israel and Hamas and Gold jumped again in line with dollar weakness, now trading around the $2,056/oz level.

Sterling Rallies After Bank of England

The pound rallied yesterday as the Bank of England remains very much an outlier in the major central bank world by remaining relatively hawkish with regard to rates and inflation concerns. Governor Andrew Bailey advised “we need to see more evidence that inflation is set to fall all the way to the 2% target and stay there”. This is in contrast to both the Fed and the ECB which are now looking at rate cuts in the short to medium term and traders are now looking for the pound to continue to appreciate in future sessions. Cable is now sitting just under a key resistance level and a clean break could see it break in fresh ranges and look to challenge the 2023 high at 1.3144. EurGbp is also sitting on a key support level and in a similar fashion a breakthrough of the 2023 low at 0.8491 would open the opportunity for much more sterling strength.

Non-Farm Payrolls Data Ahead

It has been a busy week for financial markets this week and the hits are set to keep on coming today with the key non-Farms Payroll data ahead of us in the US session. Asian markets are set to open in positive fashion after a strong day on Wall Street in the first day’s full trading after this week’s FOMC rate decision and there is little on the event calendar to disrupt that momentum. It is a similar story once the European markets open, with nothing of note on the calendar, traders will be fully focused on the US data later in the day. The headline NFP change is expected to show an increase of 187k jobs in the last month with the unemployment rate rising to 3.8% and anything far off these expectations should see plenty of volatility into the weekend.

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