Daily summary: Powell sparks selloff across riskier assets

10:03 PM March 7, 2023

  • Global indices fell sharply on Tuesday, with DAX down 0.6%, Dow Jones is trading 1.4% lower, after Fed Chair Powell during his testimony in front of congress said the US central bank would likely need to hike interest rates more than expected to combat inflation. 
  • ECB Knot said central bank can be expected to keep raising rates for quite some time after March

  • German factory orders unexpectedly rose by 1% in January, boosted by strong external demand. In the UK, house prices rose for the first time in three months.

  • Facebook parent Meta Platforms came into the spotlight after it was reported that the tech company was preparing to shed thousands more employees

  • The yield on the US 10-year Treasury note rose to 4% before easing back to 3.95%, remaining marginally below the three-month high of 4.07% touched on March 2. Despite the slight pullback, Powell's remarks drove investors to price a 60% chance of a 50 bps interest rate hike instead of back-to-back 25bps increases. 

  • US dollar jumped after Powell flags higher dot plot and the chance of a 50 bps hike and is the top performer among G10 currencies. EURUSD fell below 1.0560 level, while other risk-sensitive currencies tested multi-weeks lows. AUDUSD pair recorded sharpest decline amid dovish RBA.

  • Oil prices fell over 3.0% amid broad risk-aversion sentiment. Oil.WTI broke below major support at $77.80.  Saudi foreign minister said no change needed in oil production this year, while EIA now expects that the Brent crude oil spot price will fall from an average of $84 in Q2 to $81 in 4Q23 and then average $78 in 2024.

  • Precious metals also fell sharply amid stronger dollar and higher yields. Gold fell over 1.8% and is testing local support at $1815, while silver is losing nearly 6.0% and approaches psychological support at $20.0

  • Despite negative sentiment major cryptocurrencies are holding relatively well. Bitcoin managed to defend key support at $22,000, while Ethereum hovers above the $1550 mark. 

USDJPY is moving towards crucial resistance at 137.50, which is marked with previous price reactions and 200 SMA (red line). Source: xStation5

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