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08.02.2023 11:57 AM
Potential further rate hikes cooled markets

The negative sentiment that gripped markets for the past days was offset by the statement of Fed Chairman Jerome Powell. He said that the disinflationary process in the US economy had begun, so the central bank could raise rates further.

The comment was related to the latest employment report in the US, which indicated that the labor market remains strong despite recent price pressures and high Fed rates. Powell said that if the number of new jobs continues to rise regularly and inflation goes down, then the bank will no longer raise its cost of borrowing.

The US stock market received a noticeable boost after Powell's speech, while dollar came under pressure. Apparently, market players regard his statement as dovish, which they believe will support the national economy and demand for stocks of companies.

Most likely, this momentum will persist until the release of US inflation data next week. If the figure comes out in line with forecasts or slightly below expectations, the rally in stock markets will resume, while the depreciation in dollar and Treasury yields will intensify.

In terms of today's dynamics, positive sentiment will prevail, resulting in increased demand for equities. Dollar, on the other hand, will see a sell-off.

Forecasts for today:

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AUD/USD

Reduced tensions around China and the US, as well as a soft monetary policy stance of the Fed, will support risk appetite. A rise above 0.6990 could push the pair towards 0.7135.

USD/CAD

A rise in crude oil prices and easing of pressure in dollar could push the pair below 1.3380 and towards 1.3300.

Pati Gani,
Especialista em análise na InstaForex
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