The Fed and the BoE have left monetary policy levers untouched and continue to push back against aggressive market rate expectations. Next up, the last three of the Magnificent Seven tech companies report earnings.
(AI video Summary)
In this video, Nick Cawley, a senior strategist at DailyFX in London, talks about recent events and what we can expect for the rest of the trading session on February 1st, 2024. He starts by discussing the FOMC meeting where the Federal Reserve decided to keep interest rates unchanged, which was expected. The Fed Chair mentioned that there won't be any rate cuts in the coming March meeting due to concerns about inflation. This caused the stock market to decline slightly. However, the reaction was not that strong.
US Dollar Holding Post-FOMC Gains for Now, Gold Continues to Nudge Higher
Next, Cawley talks about the Bank of England's interest rate policy decision. It was a split vote, with six members voting to keep rates unchanged, two members voting for an increase, and one member suggesting a rate cut. This split indicates some caution within the Bank of England. Despite the split, rates will remain the same for now. However, the market is pricing in a 25 basis point cut by the Federal Reserve in May and four 25 basis point cuts by the Bank of England throughout the year.
BoE Kept Rates Unchanged bu Revised Inflation Outlook Eyes Cuts
Cawley then mentions upcoming events to watch out for. There will be the US ISM manufacturing data at 3 o'clock UK time, as well as an ECB speaker before that. Additionally, after the US stock market closes, we can expect important earnings releases from companies like Amazon, Apple, and Meta (formerly known as Facebook). These releases have the potential to significantly impact the markets.
Cawley briefly analyzes various markets. The US dollar index is currently stable, but there is a possibility of a breakout or sideways movement. The euro, on the other hand, is weak and has fallen below the 108 level, indicating a downward trend. The British pound against the US dollar has been trading sideways for a few months. The dollar-yen pair is breaking lower after reaching a multi-week high. Lastly, gold has been increasing due to geopolitical concerns, although the FOMC announcement has slowed down its rally.
In conclusion, Cawley highlights the differing expectations between the Federal Reserve and the Bank of England regarding interest rates. The market expects aggressive rate cuts by the Federal Reserve throughout 2024, while the Bank of England is taking a more cautious approach before making any cuts.
