Gold Breakout and Market Volatility Ahead: With central bank decisions and the U.S. jobs report on the horizon, this week is poised for potential market shifts.
Tuesday’s Focus on U.S. Services: The ISM Services PMI for February is expected to show a slight decline to 53.0. Any significant variance could influence the U.S. dollar by affecting FOMC rate expectations.
Central Bank Decisions on Wednesday:
The Bank of Canada is likely to maintain its current interest rate, with attention on any hints regarding future rate policies.
Fed Chair Powell’s testimony to Congress will provide insights into the Fed’s monetary policy outlook, particularly regarding rate cuts.
ECB Decision and Powell’s Testimony on Thursday:
No rate changes expected from the ECB, but a dovish stance could pressure the euro.
Powell’s second testimony to the Senate, following Wednesday’s address, may not offer new insights.
U.S. Jobs Report on Friday: The nonfarm payrolls report is anticipated to show 200K jobs added in February. Strong job growth could delay the Fed’s rate cuts, affecting the U.S. dollar and gold prices, whereas weak growth could prompt a dovish Fed outlook, potentially boosting gold.
STOCK MARKET:
Stock Market Records: The S&P 500 and Nasdaq ended the week at all-time highs, with the S&P 500 marking a significant rising streak for the first time since 1971, as noted by Deutsche Bank.
Key Events Ahead: The stock market’s rally faces tests with Federal Reserve Chair Jerome Powell’s Capitol Hill testimony and the February jobs report. Additional focus will be on services sector activity and job openings updates.
Earnings Reports: With most S&P 500 companies having reported, notable earnings from Target, Costco, and Kroger are anticipated in the coming week.
Federal Reserve Update: Jerome Powell is scheduled for his semi-annual monetary policy testimony, which will be closely watched for insights on the US economy, inflation, and interest rate cut expectations. Markets anticipate three rate cuts starting in June.
Labor Market Outlook: The February jobs report, highlighting nonfarm payroll additions and the unemployment rate, will be critical. A strong labor market is essential for smooth policy shifts and avoiding a recession.
Earnings Season Wrap-up: The S&P 500 shows a 4% earnings growth in the fourth quarter, indicating the second consecutive quarter of growth. Analysts have made smaller-than-average downward revisions for the current quarter’s earnings estimates.
Market Momentum: Despite expectations of a volatile start to 2024, the S&P 500 and Nasdaq saw their best February since 2015. Historical trends suggest continued positive momentum for the stock market through the year.
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As we step into the week commencing March 4th, anticipation fills the financial sphere for a flurry of significant economic disclosures. Investors and policymakers alike brace themselves for a cascade of reports set to influence the Federal Reserve’s trajectory leading up to the forthcoming FOMC meeting on March 19-20. All eyes are fixed on Federal Reserve Chair Jerome Powell’s semiannual monetary policy testimony before the House Financial Services and Senate Banking Committees, a session historically known as the Humphrey-Hawkins testimony, promising to command considerable attention.
This testimony is eagerly awaited for any signals indicating shifts in the Federal Reserve’s monetary policy stance. In an environment where the Federal Reserve maintains a firm grip on the federal funds target rate range of 5.25-5.50 percent to rein in inflation and ensure price stability, Powell’s remarks will be scrutinized for any hints of policy adjustments. Despite strides made in controlling inflation, the Fed’s dual mandate urges caution in loosening monetary policy, particularly with the tight labor market’s potential to spur wage inflation.
Against expectations of tempered economic growth, the imminent Beige Book release holds the promise of offering invaluable anecdotal evidence on economic conditions across the 12 Districts. While recent data suggest a resilient US economy buoyed by robust consumer spending and a strong labor market, striking a balance between nurturing growth and preventing inflation remains a nuanced challenge.
This week also heralds the arrival of the monthly employment report for February, with analysts projecting a slight moderation in nonfarm payroll growth, yet underscoring the enduring strength of the labor market fundamentals. As businesses grapple with recruitment hurdles, the interplay between job vacancies, wage pressures, and inflation dynamics assumes critical significance for market strategies.
For forex traders and market analysts at VT Markets, these unfolding events carry paramount importance. The impending economic indicators and Powell’s testimony not only provide insights into the US economic outlook but also wield significant implications for currency markets and trading strategies. As we embark on this pivotal week, remaining informed and adaptable will be imperative for navigating the evolving market landscape.
Key Takeaways:
Fed Chair Jerome Powell’s testimony could offer new insights into the Federal Reserve’s monetary policy direction.
The Beige Book and the monthly employment report will provide further clarity on the US economic health and labor market dynamics.
Market participants should remain vigilant, adapting their strategies in response to the unfolding economic indicators and central bank policies.
Stay connected with VT Markets for real-time analysis and insights on how these developments impact the forex market and trading opportunities.
· Gold prices surged past the $2,040 mark on Thursday, hitting their highest since early February, though the rise was tempered by a strong U.S. dollar.
· The uptick in gold’s value was partly driven by a drop in U.S. Treasury yields, following an economic report that matched expectations. The January core PCE deflator reported a month-on-month increase of 0.4% and a year-on-year rise of 2.8%, aligning with forecasts.
· Market sentiment was influenced by recent CPI and PPI data, leading to concerns over inflation. However, the Federal Reserve’s preferred inflation metric meeting predictions provided a boost to gold investors, encouraging them to increase their positions.
· Future Outlook: Investors should be cautious, as the initial enthusiasm from Thursday’s gold price rally might wane. The slow pace of disinflation and more relaxed financial conditions could lead the Federal Reserve to postpone its monetary policy easing, potentially putting downward pressure on gold prices.
STOCK MARKET:
· Stocks climbed on Friday following positive US inflation data that alleviated concerns over interest rate hikes, leading to record highs on Wall Street.
· Rate-sensitive technology stocks drove gains, with Europe’s Stoxx 600 index rising 0.4% and US equity futures showing increases. The S&P 500 recorded its 14th record of the year, while the Nasdaq 100 reached a new peak, partly thanks to Nvidia Corp’s record close.
· The Federal Reserve’s preferred inflation metric, personal consumption expenditures, rose at its fastest in nearly a year in January, aligning with economists’ predictions. This, along with jobless claims data indicating a softening labor market, boosted market sentiment.
· Treasuries remained stable after two days of gains, and the dollar index showed little change. The yen depreciated against the dollar following comments from the Bank of Japan Governor, hinting at delayed interest rate hikes.
· China’s factory activity contracted for the fifth consecutive month in February, reflecting ongoing demand challenges, despite a rebound in non-manufacturing activity driven by increased travel and tourism.
· The ongoing slump in China’s home sales highlighted persistent issues in the real estate sector, with a 60% decline in new home sales from major companies compared to the previous year.
· The US inflation report supported the view of a continuing disinflationary trend, reinforcing expectations for Federal Reserve rate cuts in 2024.
· Federal Reserve officials expressed varying views on the timing of interest rate cuts, balancing the need to manage inflation with economic strength indicators.
· Bitcoin maintained its value around $61,000, buoyed by significant inflows into BlackRock Inc.’s iShares Bitcoin Trust.
· Oil prices were poised for a slight weekly increase, with OPEC+ considering extending supply cuts, reflecting ongoing market strength.
Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.
Please refer to the table below for more details:
The above data is for reference only, please refer to the MT4/MT5 software for specific data.
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On Thursday, the Nasdaq Composite achieved a record close at 16,091.92, its highest since November 2021, driven by a surge in tech stocks, particularly those involved in artificial intelligence. This uplift in the stock market saw the S&P 500 also reaching new heights, alongside modest gains for the Dow Jones, marking a continuation of Wall Street’s positive trend into its fourth consecutive month. The enthusiasm around AI and major tech companies has played a pivotal role in this rally, overshadowing concerns about inflation and economic slowdown. Meanwhile, in the currency market, the US Dollar Index saw an upward movement, influencing major currency pairs and setting the stage for watchful anticipation of upcoming economic data and central bank communications. This complex financial landscape, highlighted by tech stock surges and currency fluctuations, encapsulates the dynamic interplay between equity markets and global economic indicators.
Stock Market Updates
On Thursday, the Nasdaq Composite surged to a record close, marking its first since November 2021, by advancing 0.90% to finish at an all-time high of 16,091.92. This rise was significantly buoyed by a rally in tech stocks and chips. The S&P 500 also reached a new record, increasing by 0.52% to end at 5,096.27, while the Dow Jones Industrial Average saw a modest gain of 0.12%, closing at 38,996.39. This upward movement in the stock market concluded February trading on a high note, extending Wall Street’s positive momentum into a fourth consecutive month, despite concerns over the durability of the AI-fueled rally. The Nasdaq led with a 6.12% gain for the month, followed by the S&P 500 with a 5.17% increase, and the Dow with a 2.22% rise, marking its first four-month winning streak since May 2021.
The resurgence of the Nasdaq has been particularly fueled by a wave of enthusiasm for artificial intelligence, significantly lifting major tech stocks, referred to as the “Magnificent 7” (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla), and subsequently, the broader markets throughout 2023 and into this year. This rally comes after a challenging 2022 characterized by worries over rising interest rates and recession fears. In the specifics of the day’s trading, notable performers included Advanced Micro Devices, which saw a jump of more than 9%, and the VanEck Semiconductor ETF, which closed 2.2% higher. Despite the Federal Reserve’s preferred inflation measure remaining above target in January, it did not exceed Wall Street forecasts, suggesting that consumer spending remains strong. Additionally, while there were setbacks, such as Snowflake’s share drop following the announcement of its CEO’s retirement and disappointing revenue guidance, Okta experienced a significant rise of nearly 23% after reporting strong results.
On Thursday, the stock market witnessed a positive overall performance with all sectors combined showing a gain of +0.52%. Leading the gains were Communication Services and Information Technology, up by +1.20% and +1.17% respectively, demonstrating strong investor confidence in these sectors. Other sectors such as Consumer Discretionary, Real Estate, and Materials also posted notable increases, ranging from +0.79% to +0.90%. However, not all sectors fared as well; Utilities showed minimal growth at +0.04%, while Financials slightly declined by -0.01%. The Consumer Staples and healthcare sectors faced downturns, decreasing by -0.29% and -0.73% respectively, indicating areas of investor concern or profit-taking.
Currency Market Updates
The currency market experienced notable movements, with the USD Index (DXY) advancing above the 104.00 barrier, marking its third consecutive session of gains. This strength in the US Dollar influenced various currency pairs, notably pushing the EUR/USD pair to challenge the key support level at 1.0800. The anticipation of economic data releases, including the final S&P Global Manufacturing PMI, Construction Spending, and the ISM Manufacturing PMI, alongside speeches from several Federal Reserve officials, seems to underpin the dollar’s momentum. Furthermore, the currency market is keenly awaiting inflation figures from the euro area, alongside unemployment and manufacturing data, which could influence the EUR/USD trajectory in the coming sessions.
On the other side of the spectrum, the GBP/USD pair faced downward pressure, hinting at a potential move towards the 1.2600 region, influenced by a stronger dollar and upcoming economic releases from the UK. Meanwhile, the USD/JPY pair saw a decline to the 149.20 area, reacting to market speculations about a potential policy shift by the Bank of Japan. The AUD/USD pair also succumbed to the dollar’s strength, breaking below the 0.6500 support level amid concerns over China and forthcoming economic data from Australia. Additionally, the market focus is shifting toward China with the upcoming Manufacturing PMIs, which could have significant implications for the global currency markets, highlighted by a slight drop in the USD/CNH pair to the 7.2100 zone. Amidst these currency shifts, commodities such as WTI oil and precious metals like gold and silver displayed varied performances, adding another layer of complexity to the global financial landscape.
Picks of the Day Analysis
EUR/USD (4 Hours)
EUR/USD Dips Amidst USD Rebound and Rate Cut Speculations
The EUR/USD pair has seen a downturn for the third consecutive session, touching the 1.0800 level as the US Dollar gains strength, driven by renewed interest from investors. This movement is in sync with the rising US Dollar Index (DXY), surpassing the 104.00 mark, despite a drop in US yields. The Dollar’s resurgence, after a brief dip following US PCE data indicating disinflation, was bolstered by Atlanta Fed President Raphael Bostic’s remarks on the stubborn path to the 2% inflation target and the potential for a policy rate reduction in the summer. Concurrently, both US and German bond yields experienced a decline amid anticipations of a Federal Reserve rate cut, possibly in June, with a 52% probability as forecasted by the CME Group’s FedWatch Tool. This is paralleled by the ECB’s openness to initiating its easing cycle, hinted at for a June start by board member Peter Kazimir, amidst signs of waning inflation in Germany and ahead of crucial CPI data for the eurozone that could influence ECB rate cut timings.
On Thursday, the EUR/USD moved lower and was able to reach the lower band of the Bollinger Bands. Currently, the price is moving below the middle band, suggesting a potential upward movement to reach above the middle band. Notably, the Relative Strength Index (RSI) maintains its position at 47, signaling a neutral outlook for this currency pair.
Resistance: 1.0832, 1.0858
Support: 1.0812, 1.0783
XAU/USD (4 Hours)
XAU/USD Surge Amid Disinflation Confirmation and Rate Cut Speculation
Following the release of the Core Personal Consumption Expenditure (PCE) Price Index, which met expectations and indicated ongoing disinflation, gold prices experienced a significant increase of over 0.50% during Thursday’s North American trading session. This data release led to a decrease in US Treasury bond yields, inversely benefiting the price of gold, propelling XAU/USD to $2,046. The anticipation of the Core PCE report, showing a year-on-year deceleration in inflation for January, alongside a sharp decline in headline inflation, fueled expectations of potential rate cuts by the Federal Reserve. Market predictions, influenced by the CME FedWatch Tool, now foresee a higher likelihood of a rate cut by June, contributing to the bullish momentum in gold prices amidst a broader analysis of economic indicators such as Initial Jobless Claims and Pending Home Sales.
On Thursday, XAU/USD moved higher to reach the upper band of the Bollinger Bands. Currently, the price is moving just below the upper band, suggesting a potential higher movement to reach above the upper band and reach the resistance level. The Relative Strength Index (RSI) stands at 63, signaling a bullish outlook for this pair.
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· The U.S. dollar saw a modest increase, with its strength limited by low U.S. Treasury yields, indicating market caution.
· Traders are eagerly awaiting the core PCE deflator data, a key inflation metric preferred by the Federal Reserve, which could significantly impact the central bank’s policy direction and market volatility.
· Predictions for January’s core CPI suggest a 0.4% month-over-month increase and a slight annual deceleration from 2.9% to 2.8%, indicating a minimal shift towards lower inflation.
· Recent CPI and PPI reports for the same period have been significantly higher than expected, suggesting that investors might be underestimating inflation risks, which could lead to surprises in the upcoming data.
· A higher-than-expected PCE report may lead to Wall Street adjusting its expectations for Federal Reserve rate cuts in 2024 and could delay the anticipated easing cycle, potentially increasing U.S. Treasury yields and the U.S. dollar value while negatively affecting gold prices.
· Analysis of FOMC meeting probabilities as of February 28 reflects market anticipation and interest rate expectations.
· The article will also cover technical analyses for currency pairs EUR/USD, USD/JPY, GBP/USD, and gold, focusing on recent price trends and identifying key levels for potential buying or selling pressure, useful for risk management in trading strategies.
STOCK MARKET:
· US stock futures dropped slightly as investors awaited the Federal Reserve’s important inflation metric to discern future interest rate directions. Bitcoin continued its ascent, surpassing $63,000.
· S&P 500 and Nasdaq 100 futures both saw a decrease of around 0.3%, while European stocks experienced slight gains amidst a busy earnings announcement day. Notable movements included Moncler SpA’s rise after exceeding profit expectations, Air France-KLM’s drop due to a fourth-quarter loss, and Anheuser-Busch InBev’s decline after failing to meet profit forecasts.
· The market is preparing for the release of the US core personal consumption expenditure (PCE) data, expected to highlight the Federal Reserve’s challenge in reaching its 2% inflation target. This data could indicate the Fed’s continued cautious approach towards easing monetary policy.
· Asian stock markets improved, led by a rebound in Chinese shares. The yen experienced a notable increase against the dollar following indications from the Bank of Japan that it might end its negative interest rate policy.
· Bitcoin’s value neared $64,000, continuing its growth spurred by new demand from exchange-traded funds, approaching its record high of just below $69,000 set in 2021.
· Treasury yields rose slightly after a bond rally, with the 10-year yield decreasing by four basis points and the two-year yield by six points, as per the previous day’s trading.
· Comments from New York Fed President John Williams and Atlanta Fed chief Raphael Bostic emphasized the ongoing battle against inflation and urged patience with policy adjustments, respectively.
· Market predictions align with Federal Reserve officials’ December projections, anticipating roughly 80 basis points of easing by year’s end, equivalent to three rate cuts.
· The dollar weakened against other currencies, particularly the yen, as traders expect a narrowing interest rate gap between Japan and the US.
· Upcoming key events include economic data releases from Germany and the US, statements from Federal Reserve officials, and PMI reports from China and the Eurozone.
Insights 
VT 
