Back to school, ECB signals more rate hikes, Powell sticks to hawkish script, Bitcoin hovers around $19,000 – MarketPulse | Jewelry Dukan

Parents rejoice in high school and Wall Street welcomes the consistency in the Fed’s messages that it will hold on until the inflation job is done. Stocks are higher after Fed Chair Powell stuck to his dovish script and reiterated a commitment to tighten monetary policy until inflation is back on target. Wall Street expects some easing of price pressures with next week’s inflation report, but that shouldn’t affect the current pace of tightening of 75 basis points.

ECB delivers 75bp hike

The ECB monetary policy meeting went as expected. Policymakers delivered a historic 75 basis point rate hike, signaling more rate hikes are on the cards in the next few meetings. The updated forecasts reminded traders that these forecasts should be written in pencil. The inflation outlook was improved and growth forecasts lowered, but no recession was forecast. ECB President Lagarde acknowledged that a recession is part of the downside scenario. Given the uncertainty surrounding inflation, Lagarde was reluctant to give any indication of what the ECB’s final interest rate might be. Money markets are telling us that the ECB will hike rates in the next few meetings even as the eurozone heads into recession.​

US data

US weekly jobless claims continue to fall as job market remains very strong. Initial jobless claims fell to 222,000 in the week ended Sept. 3approx. Wages will remain elevated and that should support the Fed’s mission to tighten rates aggressively.

oil

It looks like crude oil prices are fighting for their lives. The collapse in oil prices caused by the destruction of crude oil demand may have found a bottom.​ Energy traders have largely priced in China’s COVID shutdowns and are concerned about aggressive ECB and Fed tightening signals.

gold

Gold prices fall as the era of negative interest rates is behind us. Interest-bearing gold will struggle as ECB and Denmark end interest rates below zero. Gold seems poised to consolidate at the $1700 level by next week’s US inflation report.

cryptos

Fed Chair Powell’s monetary policy presentation at the CATO Institute also included an update on central bank digital currencies. Powell reiterated that the Fed doesn’t want to stand in the way of innovation, but regulation is needed. It is clear that a Fed digital dollar would be difficult for them to make.​ The assessment process with CBDC will take much more time as the Fed struggles to ensure privacy protections and avoid market chaos when funds be transferred to a CBDC. Powell also focused on the need for a regulatory framework to control stablecoins.

Bitcoin is giving back some of yesterday’s gains as risky assets declined after a double dose of hawkishness from Fed Chair Powell and ECB President Lagarde. Bitcoin is attempting to stabilize above the $19,000 level, but that will be difficult amid consistent messages about adopting interest rates above the final rate required by major central banks.

This article is for general informational purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily those of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for everyone. You could lose all your deposited money.

Ed Moya has over 20 years of trading experience and is a Senior Market Analyst at OANDA. He provides up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policy and market reactions to corporate news. His particular expertise lies across a wide range of asset classes, including forex, commodities, fixed income, equities and cryptocurrencies. Throughout his career, Ed has worked with some of Wall Street’s leading forex brokers, research teams and news outlets including Global Forex Trading, FX Solutions and Trading Advantage. Most recently, he worked at TradeTheNews.com providing market analysis of economic data and company news. Ed lives in New York and is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most respected global news outlets, including Reuters, Bloomberg and the Associated Press, and he is regularly cited in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed has a BA in Economics from Rutgers University.

Ed Moya

Ed Moya

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