Noor Trends News, Technical Analysis, Educational Tools and Recommendations
The US Dollar exhibited negative performance on Thursday, as the gloomy mood that ruled financial markets eased later on the day, but most European and US indexes closed in the red territory.
Hawkish comments from ECB and US Fed’s policymakers suggested central banks are far from done with their quantitative tightening cycles.
Key Developments
Geopolitically, Russia on Thursday warned that the Ukraine war will escalate if the West insists on providing Kyiv with longer-range weapons. Since the conflict broke out, the US has sent advanced and high-precision weapons and other military equipment to Ukraine to help the war-torn nation against Russian aggression.
The Treasury Department will adopt extraordinary measures to allow the federal government to keep paying its bills. The United States hit its debt limit on Thursday and the measures are meant to prevent breaching its statutory debt limit, so, Yellen asked lawmakers to raise or suspend the cap so that the government can continue meeting its financial obligations.
Fed’s Vice Chair Lael Brainard said that ”there are reasons to think high inflation in the more labour sensitive “core services ex-housing” basket might reflect the pass-through of pandemic and war one-offs and not solely cyclical strength from tight labour markets.
ECB’s Klaas Knot said that there would be more than one 50 basis points increase in interest rates, adding that market participants may be underestimating the ECB’s commitment to tame prices. Christine Lagarde sounded hawkish as well, reiterating that the ECB will stay on course with rate hikes, adding that the job market in Europe has never been as vibrant as now.
Lagarde also said that they are not seeing inflation expectations unanchoring. The EUR/USD pair kept seesawing around 1.0800, ending the day at 1.0820.
The GBP/USD pair gained upward traction ahead of the daily close and approached the 1.2400 figure, AUD/USD recovered the 0.6900 level following a slump to 0.6871, as poor Australian employment and inflation figures weighed on the AUD. USD/CAD retreated and trades at around 1.3450. Finally, USD/JPY spent the day consolidating at around 128.50.
Gold soared in a risk-averse environment, with the bright metal trading around $1,930 a troy ounce. Crude oil picked up and WTI settled at $80.65 a barrel.
Economic Data
Thursday’s data showed that overall US housing starts declined 1.4% to a rate of 1.382 million units last month. Building permits dropped as well, down 1.6% o a rate of 1.330 million units.
Manufacturing activity in the Mid-Atlantic region retreated again in January. The Philadelphia Fed’s monthly manufacturing index rose to negative 8.9 this month from negative 13.7 in December, a larger improvement than economists in a Reuters poll had expected.
Conditions overall were labeled as the least negative in three months in a survey of goods producers that also showed inflation pressures – measured by the prices paid index – dropping to 24.5 in January from 36.3 last month. That was the lowest in nearly two-and-a-half years.
Initial claims for state unemployment benefits dropped 15,000 to a seasonally-adjusted 190,000 for the week ended Jan. 14. Economists polled by Reuters had forecast 214,000 claims for the latest week.
The housing market is in recession and regional Fed surveys are weak and are going to show that business activity is struggling. But the initial jobless claims report reinforces that this labour market remains strong. The labour market needs to break for inflation to continue go down.
Also Read
How does Canada’s dollar react to oil prices?
What Legacy Has Jacinda Ardern Left Behind For New Zealand’s Economy?
Fed’s Brainard insists to bring inflation back to 2% target
Yen rises, US dollar falls on US mixed data
US Debt Ceiling Raises Economic Woes
