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Interviewed by Dubai TV, Mohammed Hashad, the Head of Research and Development Department at Noor Capital and member of the US Association of Technical Analysts, commented on a number of current market developments, most notably the following:
(I) US Dollar’s Performance
Interest rates have already been left unchanged by the US Federal Reserve, but asked why the dollar is still recording strong gains, Hashad pointed out that the Federal Reserve kept the interest rate unchanged, as the markets expected, at the level of 5.50%, but the main focus is not on hiking or stabilizing interest rates, rather, the main focus is on the future outlook and the future path of monetary policy. At post-FOMC meeting press conference, Fed Chair Jerome Powell was still sticking to the tone of monetary tightening and still wanted a restricted interest rate regime.
Powell also directly stated that he is ready to raise interest rates further, particularly if necessary, as the US economy continues to record above-trend growth rates. Powell also wants an inflation target of 2%, which will not be achieved unless inflation declines and there is labour market with appropriate conditions, or at least relatively quieter conditions than those of the current labour market.
Hashad added that 12 Fed members want to raise interest rates to 5.75%, compared to only 7 who want to stop hiking interest rates. Consequently, all these factors supported the US dollar to its highest level in six months, with large purchases and large cash flows in the markets directed towards the US dollar.
The dollar also surges, supported by the jump in two-year US bond yields, which leapt to 5.20%, its highest level since 2006, and ten-year Treasury bond yields, recording their highest level since 2007.
(II) Gold
Despite the rise in the US dollar, gold also rose. Asked how this could be explained, Hashad stated that gold’s surge was a marginal increase after it touched the $1913 level, and it is believed that there are very important technical levels at this level, which are: the main support level at 1913.
“Hashad” also indicated that “from one session to another, gold is trying to rebound, but the momentum of the dollar still puts negative pressure on gold prices.
(III) US stocks
Returning to the Federal Reserve, although it has already kept interest rates unchanged, markets have seen a heavy impact on US, asked why this has taken place, Hashad mentioned that US stocks declined significantly and suffered heavy losses during yesterday’s trading under pressure from the services, consumer goods, and financial sectors. In the last press conference, Jerome Powell said that even if there was a cut in 2024, there would only be two cuts.
Of course, continuing to raise interest rates is not a good environment for stocks in general and leads to higher borrowing costs. Consequently, it negatively affects the profitability of companies, and markets witnessed a clear decline in the Dow Jones by more than 1% and the Nasdaq Composite declined by about 1.82%.
(IV) Oil Prices
Oil prices are swinging in both directions, perhaps tending to rise further, but asked how oil price movements could be explained, and what the most prominent factors affecting oil performance are, Hashad explained that volatility is the dominant characteristic of oil prices, which move in both upward and downward directions. Hashad explained that oil declined significantly during Thursday’s trading with fears linked to interest rate hiking outlook, which would negatively affect demand levels.
In addition to the economic challenges facing the Chinese economy, as it is considered one of the largest oil consumers in the world, Friday’s trading began with some gains, stable above the level of 90.50 per barrel, amid fears that the Russian ban on fuel may impact global oil supplies. In addition, crude oil tried to benefit from inventory data that came in positive, better than expected.
Also speaking of oil, a number of major banks around the world, including Goldman Sachs, expected the price of oil to reach $100 per barrel by the end of the year, and there were statements yesterday expecting it to reach $120, asked whether he could support these expectations, Hashad stated that there are many factors in the markets that affect oil prices, most notably the Russia and Ukraine issue.
Therefore, it is better to judge upon what we see and not to jump to expectations that are far from the markets, but Hashad also rules out a rise in crude oil above $100 per barrel in light of the current economic conditions.
(V) Japan’s Central Bank
In light of the Japanese Central Bank not changing its usual monetary policy, unlike other central banks, and asked in what direction the Japanese Central Bank’s decisions could move, Hashad stated that the Bank of Japan is always different from the other central banks, as it kept interest rates at negative levels, and also kept the ten-year return rate at zero levels, but Hashad believes that today’s meeting was different.
Hashad pointed out that there were some positive signs that Japan’s central bank may begin to think about abandoning the negative policy and, instead, begin to abandon control of the yield curve, provided that inflation approaches 2%.
