- European indices pulled sharply away from 11-month highs on Thursday, with DAX down 1.72% as ECB President Lagarde reiterated the central bank will continue raising interest rates until inflation returns to its 2% target "in a timely manner", while Knot said that markets may be underestimating planned rate hikes by the bloc's central bank and investors should take more seriously its forecast to raise rates in multiples of 50 bps.
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ECB Minutes showed that some policymakers initially argued for a 75 bp hike in December, as inflation was clearly expected to be too high for too long and the worsened outlook required a rate hike larger than that priced in by markets. Officials also noted that interest rates would be raised into restrictive territory if necessary, and that they would remain there for longer than expected.
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Major Wall Street indices extended yesterday losses weighed down by hawkish FED members and fresh macroeconomic data. Markets fear that FED will stick to its tightening bath despite worsening macroeconomic outlook.
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Fed's Brainard believes that for a while, policy must be sufficiently restrictive. In his opinion the drag of monetary policy on US economic growth and employment is likely to increase in 2023.
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Fed's Collins said the policy rate should be raised to just above 5%, and then held there for some time. On the other hand, she added that it is appropriate to slow the pace of rate hikes, especially since risks are now more balanced.
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Weekly jobless claims fell to the lowest since September 2022, easing expectations that the Fed will pivot away from its aggressive stance. The Philadelphia Fed Manufacturing Index rose to -8.9 in January from a revised reading of -13.7 in December, compared to market expectations of -11.
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On the corporate front, Procter & Gamble fell slightly after the consumer goods giant posted mixed quarterly results, while Netflix will report its quarterly figures today after market close.
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US Treasury Secretary Yellen told Congress that the debt issuance suspension period will begin on Thursday, January 19th and last through Monday, June 5th, 2023.
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Oil prices rose over 1.0% after the International Energy Agency said that with China pivoting away from its strict COVID-19 restrictions, demand for crude is likely to hit a new record high this year while price cap sanctions on Russia could dent supply.
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WTI crude tested 81.00 per barrel, however the upward move was dented by the latest EIA report which showed stocks of crude oil in the US unexpectedly rose by 8.408 million barrels, while analysts expected 0.593 million draw.
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Precious metals launched another upward move on Thursday amid a slightly weaker dollar. Gold again hover around recent high at $1920, while silver is climbing slowly towards resistance at $24.00.
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The dollar index hovers 102 after dipping briefly to an over 7-month low of 101.53 in the previous session. USD strengthened against NZD and AUD, however weakened slightly against other major currencies, while markets are pricing in a near 100% probability that the FOMC will raise its benchmark interest rate by another 0.25 bp in February.
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Cryptocurrencies managed to erase early losses and are trading slightly higher. Yesterday Bitcoin pulled back below $21000 and currently hovers near $20900 level, while Ethereum managed to defend key support at $1500.
SILVER - the upward trend on the silver market has clearly slowed down recently. However, looking at the H4 interval, it seems too early to think about a change of the main sentiment. Today the price rebounded from the support at $23.30, which is marked with the lower limit of the 1:1 structure and is moving towards the psychological $24.00 level. Source: xStation5
