Today is an interesting day on the markets as investors await a significant amount of data from the US, markets will pay particular attention to readings from manufacturing, which will be kicked off by the NY Fed’s regional benchmark and the Michigan index, which will complement readings on inflation expectations.
Weaker data could add pressure on the Fed, which will decide on interest rates next week and while in the baseline scenario, markets expect one more hike in the U.S., it seems they are pricing it with a much higher probability in November than in September. Strong data readings could please the markets and confirm the strength of the economy (including the performance of companies) – despite the Federal Reserve’s tightening cycle. Inflation in the U.S. has definitely fallen and appears less persistent than in the Eurozone and while the ECB raised interest rates by 25 bps, it signaled the end of the hiking cycle, which supports the rebound in the stock market while Lagarde also appeared dovish at the press conference which was a change in comparison to previous meetings. As we await next week’s FED decision it could be possible that the end of the hiking cycle in the eurozone may increase the chances that the Fed will keep interest rates unchanged which could lead to some interesting moves both in the stock market and the FX one.
Gold continues to rebound after ECB decision
The price of gold has managed to climb and break through the $1900 level after testing it yesterday thanks to a strong move in EURUSD and as the ECB appears to be done with hikes while the Fed will probably keep interest rates unchanged in the next meeting. However, we can also see some weakness from the USD index impacting the price of the metal which is still attempting to recover from the over 2% downward move that saw the price fall from a high around $1950 at the beginning of this month. Investors remain concerned that the macroeconomic situation seems unstable and await today’s data to determine the risks posed by a potential slowdown in activity. In either case, the price of gold still has quite a way to go before reaching recent highs and with several resistance levels on the way, it remains to be seen whether or not it will manage to continue the upward move or pullback once again.