The Fed will continue its rate hiking campaign | 03 March 2023

#SP500:

Market have now finished lower for three consecutive weeks amid concerns with equity valuations in the face of investor skepticism over the disinflation narrative. A stronger-than-expected labor market, hawkish Federal Reserve commentary, and hotter-than-expected personal consumption expenditures data has convinced investors the Fed will hold interest rates higher for longer in order to curb pricing pressures. While yields and stocks remain negatively correlated, the correlation between the S&P 500 and 10-year yields has recently weakened. In general, this suggests stocks are less sensitive to higher rates compared to the past several months.

Trading recommendation: range 3925 - 4080.

XAUUSD:

Expectations that the U.S. Federal Reserve will need to push interest rates higher and keep them elevated longer than previously projected rose after data showed a key inflation gauge accelerated last month. The Commerce Department reported that the Personal Consumption Expenditures price index, the metric by which the Fed measures its 2% inflation target, rose 5.4% last month from a year earlier, a pickup from an upwardly revised 5.3% annual pace in December. The report "is another indication that the impulse of inflation and price pressures is still with us," Cleveland Fed President Loretta Mester told on the sidelines of a conference in New York. "It's going to take more effort on the part of the Fed to get inflation on that sustainable downward path to 2%." This is a negative signal for gold.

Trading recommendation: sell 1842 and take profit 1820.

#WTI:

Oil prices settled up on expectations of steep cuts to Russian production next month. Prices got an early boost from Russia's plans to cut oil exports from its western ports by up to 25% in March, exceeding its announced production cuts of 500,000 barrels per day. The dollar index rose, after minutes from the latest U.S. Federal Reserve meeting showed a majority of Fed officials agreed the risks of high inflation warranted further rate hikes. A stronger greenback makes dollar-denominated oil more expensive for holders of other currencies, hitting demand. While a stronger dollar remains a near-term headwind for crude, traders said they expect later Russian production and China's reopening to tighten the oil market and support prices.

Trading recommendation: range 74.00 - 79.00.