- Major European indices finished slightly higher today, with the Dax hovering near 11 month high, supported by a slew of upbeat quarterly results and signs of easing inflationary pressure. Also German Chancellor Olaf Scholz told Bloomberg that Europe's largest economy should be able to avoid a recession this year.
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FTSE100 closed 0.26% lower, despite UK inflation rate eased to 10.5% in December, moving further away from the 41-year high of 11.1% struck in October. On the other hand, the core CPI rate was unchanged at 6.3% and food and drink prices rose the most since 1977.
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Three major US indices erased early gains and are trading over 1.0% lower as upbeat reactions to latest macroeconomic data was overshadowed by another set of hawkish comments from FED members.
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US PPI inflation fell further in December to 6.2%, the most since the start of the pandemic, while a bigger than expected drop in retail sales renewed hopes that the Fed will slow its aggressive tightening campaign but exacerbating worries about a recession.
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Fed Bullar said that the US central bank should move as quickly as possible to reach 5%, then react to data. December projections suggest interest rates will rise to 5.25-5.5% range. In his opinion interest rates must be higher, they are not yet at a restrictive level.
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Fed's Mester said policy rates should rise a little bit above the 5% to 5.25% range projected by policymakers for the end of 2023. Mester would like to see inflation moving down faster before she could support a pause within the next few months. "I do believe we have to continue raising ... and then hold for a while so that we get back to price stability in a timely way.”
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FED's George said US central bank must restore price stability and that means 2% inflation
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Oil gained nearly 2% today on speculation regarding possible production cuts in Russia. In the US, Republicans want to ban the president from deciding on strategic oil reserves. Nevertheless oil also gave back early gains as global sentiment worsened. OIL.WTI pulled back from fresh highs at $82.40 to $79.50, while Brent fell from $88.00 to $85.40.
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NATGAS fell over 7.0% to the lowest level since June 2021 despite warmer weather forecasts. On the other hand, US natural gas production is likely to grow more than 2% this year to a record daily average of 100.3 billion cubic feet, the Energy Information Administration said.
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Precious metals strengthened after the release of US data, however moods turned sour later on despite weaker dollar and lower US treasury bond yields. Gold failed to stay above the $1920 mark and pulled back to resistance at $1900, while silver fell 2.0% and retreated to $23.50 level.
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The Forex market experienced increased volatility during today's session. Early in the morning yen weakened significantly as the Bank of Japan crushed speculations of another policy adjustment by maintaining its ultra-low interest rates and leaving its yield control policy unchanged. The USDJPY pair rose over 2.5% ahead of the European session, nevertheless almost the entire move was erased later on.
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The US dollar took a massive hit after release of the latest macro data form the US, however remarks from FED policymakers helped to mitigate some losses.
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Bitcoin briefly managed to jump above $21600, which is the highest level since September 2022, however buyers failed to uphold momentum and the king of crypto tested $20400 level.
AUDUSD rose sharply in the first part of the session, however buyers failed to break above key resistance at 0.7055, which is marked with previous price reactions and 38.25 Fibonacci retracement of the upward move started in March 2020. As long as the pair sits below, another downward impulse towards support at 0.6880 may be launched. Source: xStation5
