Powell Hits U.S. Stocks, Dax Holds, USD Rallies

A typical NFP trading week is about to have its final trading day. The entire week so far was characterized by the markets reversing the end of February moves sharply.  

As such, the stock market indices in the United States opened the new trading week (and month), with a big behind. With stocks in the recovery mode last Monday and Tuesday, the risk-on sentiment revived, and the FX market began selling dollars again. Part of the risk-on move is to sell JPY and CHF – that is exactly what the market did this week. The USD/JPY rose to above 107.50 yesterday, while the moves in the CHF pairs were even more impressive – AUD/CHF and GBP/CHF  kept performing during the four trading days of the week.

The U.S. tech sector dropped about 2% on Wednesday as Tesla, and some Tesla ETFs (e.g., ARK) went under pressure. However, the selling did not affect the Dow Jones, for instance, that remained in tight ranges, keeping an eye on the highs. The support behind stocks was expected to come from Jerome Powell, which held a speech yesterday in the second half of the North American session. As always, when the Fed is on the wires, the market listens (and usually remains bid). Only this time, the Fed did not deliver.

On the commodities markets, oil and gold were key markets. On the one hand, gold has a hard time bouncing from the lows, and it keeps the bearish trend seen this year. On the other hand, crude oil bounced yesterday to a new high for the year, on the back of hawkish news from the OPEC meeting – no increase in supply.

Weekly Analysis

The economic data this week revealed strong manufacturing and services sectors in the United States. The ISM data continues to point toward expansion in the two sectors, something that bodes well for the economic recovery and for today’s NFP report.

The ADP or private payrolls disappointed on Wednesday, but it is not the first time when the two reports diverge. Anything else from economic data had little or no impact on the markets, with the focus being on the U.S. Treasury yield evolution and its impact on the price of gold, the value of the dollar, and the stock market. We may say that the markets waited for Powell’s speech yesterday and the NFP report today.

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Disclaimer: None of the content in this article should be viewed as investment advice or a recommendation to buy or sell. Past performance/statistics may not necessarily reflect future ...

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