US and European futures are trading higher as traders are ready to push the markets higher and pick up the momentum where they left off yesterday. Market optimism is that perhaps the worse is over for the US in terms of inflation reading, and the Fed isn’t going to increase the interest aggressively. Yesterday, traders celebrated the news when Jerome Powell, the Chairman of the Fed, said that smaller interest rate hikes are more likely to be commonplace going forward, even though inflation hasn’t dropped to the extent that Fed would like it t drop.
Remember, as we mentioned yesterday, what is highly important to the Fed is that they maintain a more coherent message. Previously, the Fed chairman hinted that in the coming future, the Fed could begin the process of slow interest rate hikes. Yesterday, his statement not only confirmed this message further but gave clear guidance regarding when that will occur. The fact that the Fed will begin the process of a slower interest rate hike this month is music to many investors’ ears.
Powell gave confirmation last night that the Fed is likely to increase the interest rates in the US more slowly beginning this month, and this means that era of aggressive interest rate hikes is over. Although many members of the Fed may bring a lot of noise in the market and adversely influence the risk appetite among investors and traders by spreading different views of the Fed, it is important not to let that affect your trading decisions.
It is important to note here that Jerome Powell mentioned that the current fight is inadequate. If inflation shows a further loss of momentum, the Fed may have to put its foot back on the gas paddle, which is essential for traders and investors to keep in mind.
Regarding economic data, yesterday’s ADP number confirmed weakness in the US labour market. The number was disappointing and has set a negative tone for the US NFP data, which is due tomorrow. Many are anticipating the number to be coming on the soft side. The number will be released tomorrow, and it is the most important economic data for the US economy, which is likely to set the trading tone among traders for the rest of the month.
The previous metal scored stellar performance yesterday and is trading higher today as well. There were two reasons we saw gold prices moving higher and why the momentum is still going on today. Firstly, the dollar index plunged after the Feds’ view on its monetary policy. Traders know that an era of aggressive interest rate hikes is over, and only smaller rate hikes will occur. Secondly, the US ADP number made traders much more apprehensive about the US economy. Nonetheless, what matters the most is the dollar index, which is primarily losing momentum, pushing the price of gold higher.
Traders will be watching the US NFP data, which will be coming tomorrow at 1:30 PM GMT, and the number will undoubtedly increase volatility.
Bitcoin prices have traded positively for the past two days, grinding to the upside. Yesterday we saw some positive momentum, and that was because the Fed confirmed that they would not be raising the interest rates more aggressively. Today we have the hearing for the FTX, and any further evidence or new news coming to the public domain could influence the price action. Traders want to hear a lesson given to the FTX team so that we never see this behaviour in the industry.