Noor Capital | Interview with Muhammad Hashad on Dubai TV – 12/12/2022

In an interview on Dubai TV, Monday, Mohamed Hashad, Head of Research and Development at Noor Capital and member of the American Association of Technical Analysts, commented on the most important developments in global financial markets on the first day of trading during this week, most notably the Federal Reserve’s two-day meeting.

Fed’s Awaited Interest Rate Decision Expectations

On the market’s expectations of the decision to raise the interest rate by 50 basis points, and in response to a question about whether this could mean that the US central bank is going to start slowing the pace of interest rate hiking, Hashad answered: “It seems that the markets have begun to largely adopt a proactive stance towards the Fed’s decision. The markets are anticipating that the US Central Bank will slow down the pace of raising the interest rate, as the markets expect to raise the interest rate by 50 basis points instead of the previous times that witnessed raising the interest rate by 75 basis points.

Hashad believes that there still exists an opportunity for further interest rate hikes, and even to raising it by 75 basis points until the first quarter of 2023, as the labour market in the United States is still robust, which is something that Fed’s Jerome Powell does not want, and during the first Friday of December, the US economy was able to add 263,000 jobs as a further evidence of the continued strength of the labour market, wages continue to rise and inflation is still far from the Fed’s target level at the 2% mark. Hashad also noted that that it may take more time and will not Inflation is receding and inflationary pressures will not recede until after the markets witness a real decline in demand levels, and in general, according to Hashad, this path is in line with the policies of central banks in major economies, which are clearly willing to sacrifice a slowdown in economic activity in order to achieve victory in its fight to contain inflation.

Reasons for the US dollar’s positive performance

With regard to the performance of the US dollar, which has noticeably advanced, and whether the main reason behind its surge is the latest inflation data, or whether there are other factors that interfere with the emergence of the current positive performance of the dollar, Hashad replied: “There exist several factors that joined together to support the US currency, led by the latest reading of the Producer Price Index, one of the most important US inflation data, which grew by 0.3 in its reading released last week, supported by the services sector, and this is evidence of continued inflationary pressures. The US dollar also benefited from a significant increase in Treasury bond yields of various maturities, including the 10-year Treasury yields, recording gains of 1.5%, in addition to concerns about the economic recession and the possibility of global growth drifting towards a further slowdown, which makes the dollar one of the key safe haven currencies, preferred by investors, and therefore, the dollar witnessed an increase during last week’s trading through the opening of trading this week, today.

A busy week of economic events and data ahead

It is obvious that we have an eventful week with a lot of economic data, the most important of which is the data that investors should follow, and about that, Hashad says: “It seems that we have a decisive week for currencies and commodities. Investors and markets are waiting for the Fed’s decision to raise interest rates, just as they are waiting for the press conference that follows the announcement of the monetary policy decision by the FOMC, as well as Jerome Powell’s comments in addition to the expected economic data. “I mean the US retail sales data, this is with regard to the US economy, and on the other hand, for the British economy, investors are waiting for important data and the interest rate decision by the Bank of England, on Friday, and inflation data”, Hashad added.

Why do oil prices fall?

Asked whether the bleeding losses witnessed by the markets in oil prices would continue, and what reasons are there that led to in oil price decline, in the first place, Hashad answered: “It seems that oil continues its losses, recording its largest weekly decline in a month, and it is trading around 70 US dollars per barrel, and as fears of slowing global economic growth continue to exert negative pressure on oil prices, amid rising cases of Covid-19 infection in China, which leads to a negative impact on the Chinese economy, the second largest importer of energy in the world”.

Hashad believes that oil is likely to decline further, especially after today’s markets saw oil tankers allowed to pass through Turkey, and thus this development led to a decline in concerns about supplies. Hashad believes that oil trading may fall this week to below $70, and it may even touch $68 or $67 dollars per barrel.

Where is gold heading?

Asked where gold is heading in light of all the said developments, Hashad answered, “gold is still perplexed between high levels of inflation as a safe haven, but the continued rise of the US dollar increases the cost of holding gold bars compared to holding other currencies, so if the markets witness Fed’s decision to raise the interest rate by only 50 basis points and therefore if the dollar declines as a result of such a decision, which at the same time indicates a slowdown in the pace of interest rate hiking, we may witness a rise in gold prices to trade at $1800 an ounce”, he added.