The US and European futures continue to march higher, and traders are very much picking up positive momentum from Asia. Traders are anticipating that any bad news could be good for the market as it is unlikely that the Fed will make another U-turn to its monetary policy. The ultra-hawkish monetary policy has left the town and it is time for a less hawkish one. This could continue to provide the tailwind for the risk-on rally. In terms of earnings, we heard from Wall Street’s heavy hitters yesterday, and the message was kind of mixed. Goldman Sachs fell below earnings expectations and its stock tanked while Morgan Stanley’s stock performed well on the heels of better-than-expected numbers in its wealth management business. Today, we will hear from companies like Charles Schwab and PNC Financial Services Group.
In the forex market, the BOJ news is creating more waves. The Bank of Japan certainly surprised markets by making no change in the yield curve, which was very much anticipated by the market players. The move by the BOJ made the currency move lower against the dollar index by over 2.04%. The BOJ sounded highly confident in its statement noting that the country’s economy is still very much expected to continue to grow at a pace that is likely to be above its potential growth rate. As for the interest rate part, the bank kept the interest rate unchanged which means that it is maintaining its dovish stance at -0.1%. This is again in line with the market expectations. This rate has been at this level in 2016.
The economic docket is full of firecrackers today. Firstly, we are going to get the data from the UK. The economic numbers will give us clues about the inflation situation in the UK. Traders have become more comfortable about inflation moving away from its 40-year high in the US. There is a lot of optimism in the US about inflation coming under control as the Fed has put the correct initiatives in place to control inflation. However, the BOE is in a tight spot and doesn’t have the same luxury that the US has. Higher inflation readings are likely to remain a sore thumb for the BOE.
It is anticipated that the inflation reading in the UK is likely to remain in the double digits. The forecast is for 10.5%, while the previous reading came in at 10.7%. Double-digit inflation numbers tend to scare investors, although if we look at the performance of the FTSE 100 index, it is trading near record highs. A higher inflation number in the UK is going to add more pressure on the BOE to continue to increase the interest rate and maintain its hawkish monetary policy. The bottom line is that the inflation numbers in the UK aren’t going to bring any good news for the UK’s housing market or even for the consumers. The cost of living crisis is likely to become even worse in the UK, which means tough times are ahead for the UK economy.
Later in the day, we have the US Retail Sales m/m data. The number will provide more insight into consumer spending habits. The number is expected to print the reading of -0.8%, while the previous number was at -0.6%.
The crypto industry is certainly roaring back to life, and if one looks at the BTC price today, one can see that most of the losses are recovered since the FTX debacle. It is certainly an encouraging thing for the BTC bulls to see the price moving above the 20K price level. However, as we mentioned previously that we are certainly in no way of being out of the woods. For that to happen, the BTC price certainly needs to break above the 30K price level and only that will establish that prices are moving in the right direction and we will see an actual bull rally taking place.
Gold prices continue to retrace from their recent highs and today is the second consecutive day that we see the prices moving lower. The reason that we see prices are retracing from their eight-month high is mainly because of profit taking. It is pretty much established that the Fed in the US is likely to maintain its less hawkish monetary policy as inflation seems to be moving in the right direction, which is taking the pressure away.
Another important element to keep an eye on when it comes to gold prices is China’s economy opening up. This is because the Chinese are major buyers of gold, and with China re-opening, its economy should have another positive influence on the price action. In addition, the Chinese Lunar year is approaching, which generally has more of a positive influence on the gold price as well. Overall, traders continue to expect gold to outperform in 2023, and the price could approach the level of $2,000 in the coming months, if not weeks.