The Fed has no choice | 18 November 2022

The Fed has no choice


#SP500:


Inflation shock is over, but 'inflation stick' of briskly rising services and wage inflation is here to stay; inflation will come down but to remain above range past 20 years. The Federal Reserve has repeatedly signaled its determination to reduce inflation to its 2% target by raising rates aggressively. But in doing so, policymakers risk slowing down the economy, which could force them to slow the pace of rate hikes - a shift investors have referred as a "pivot". The inflation data triggered a huge push into risk assets such as equities, as the chances of a pivot grew.


Trading recommendation: buy 3930 and take profit 4078.


The Fed has no choice


XAUUSD:


The dollar fell across the board for, as investors favored riskier currencies following a cooler-than-expected U.S. inflation data that boosted the case for the Federal Reserve to ease off its hefty interest rate hikes. The dollar's long rally over the last two years had drawn a host of dollar bulls leading to crowded positioning and inflation data left a lot of them looking for a quick exit. The futures market shows investors are pricing in a 71.5% chance of a 50-basis-point U.S. rate increase next month, up from around 50/50 a week ago. This is a positive signal for the precious metals market.


Trading recommendation: buy 1749 and take profit 1783.


The Fed has no choice


#WTI:


Oil prices jumped after health authorities in top global crude importer China eased some of the country's heavy COVID curbs, raising hopes for improved economic activity and demand in the world's top crude importer. Fed policymakers signaled a more gradual approach to hiking rates, but made clear that rates may still end up higher for longer than most thought just a couple months ago to tame 40-year high inflation. Market bets that the Fed will raise rates by 50 basis points at its next meeting in December, instead of 75 basis points, increased. This is a positive signal for the oil market.


Trading recommendation: buy 86.50 and take profit 89.40

 

David Johnson
Analyst of «FreshForex» company
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