US futures are trading mixed as investors are catching their breath as the US stock indices scored their best one-day gain since 2020. Traders are finding comfort in the Federal Reserve’s monetary policy decision which matched the market expectations and raised the interest rate by 50 basis points. The most pleasing news for investors and traders, which supports sentiment, is that the Fed doesn’t believe that they need to increase the interest rate by 75 basis points. The big question for many traders is, if the US stock market has formed a bottom?
Over in Europe, traders are taking the lead from Wall Street. The Fed’s monetary policy decision certainly has increased the pressure on the ECB to stop sitting on its hands and begin the tightening process, while in the UK, all eyes are on the Bank of England and its monetary policy decision.
The bank is expected to increase the interest rate for the fourth consecutive time, which will take the rates in the UK to its highest level in nearly 13 years. A fourth back-to-back hike is likely in May, pushing rates to their highest since 2009.
Traders also expect BOE policymakers to vote 6-2-1 in favour of taking the benchmark rate to 1% from 0.75% in today’s meeting. Jon Cunliffe is expected to vote for no change, while Catherine Mann and Michael Saunders are likely to vote for a 50-basis point increase. According to market expectations, a 25-basis point increase is a certain conclusion, with a 20 percent possibility of a 50-basis point increase.
Oil prices are surging once again today as investors are keeping a close on the EU, which is inching closer to banning Russian oil. Since Russia’s invasion of Ukraine, oil prices have surged dramatically and demonstrated extreme volatility.
However, for the last number of days, both Brent and Crude oil continue to trade near the $100 per barrel price mark. This is mainly because news of a possible embargo on Russian oil. Traders have been pricing such a scenario from the EU for a while now, and it will still take the EU six months to phase out Russian oil.
In addition to this, oil is a globally traded commodity that can be supplied quickly and from many sources. This makes redistributing output quite simple – the void created by Russia will be rather easy to fill. Businesses will have time to react due to the proposed slow phase-in of the prohibition, which would take six months for crude and somewhat longer for refined goods.
The precious metal scored healthy gains yesterday, and it continues to maintain those gains today. For traders, two things matter the most now. Firstly, they are keeping a close eye on the US inflation situation, which is expected to drop from its peak, and if that does become a reality, then it means an even less aggressive monetary policy stance from the Fed, which is positive for the gold price. Secondly, the US employment reading—the US NFP data is due tomorrow.
The US NFP number is the biggest economic catalyst for the gold price between today and tomorrow, and the number is likely to make or break the rally in the gold price. The US ADP data has set the stage for a weak number, and that could take some further steam out of the dollar index, which could push the gold price higher.