Despite a US stock market rally yesterday, EU bourses did not sustain their higher start into the day, with oil and gas are the leading gains instead after Fed Chair Powell told the House Financial Services Committee on Wednesday that most FOMC members saw a near term rate cut as warranted. The reasons behind this statement being mainly global growth concerns and low inflation with the immediate result of stock markets in the US trading higher and the S&P reaching the magical 3k level yesterday.
But can US Stock markets really continue to rise just on the expectation of cheaper money? Many indicators show that we may be very close to a possibly bigger setback, as earnings of companies continue to deteriorate, and business leaders do not see a bright future ahead. Meanwhile, we have not seen any meaningful developments in the trade war saga, which means to me that for sure there wasn’t any substantial progress made, otherwise we would likely have seen a tweet about it by Donald Trump.
Markets Edge Higher
Asian markets also rose on Thursday with Hong Kong’s Hang Seng index and South Korea’s Kospi leading gains. Back in Europe, investors will be keeping an eye on the Bank of England’s financial stability report, due at 9.30 GMT.
Powell Testimony Crashes the USD
The dollar continued on a bearish trend on Thursday after Federal Reserve Chairman Jerome Powell set the stage for a rate cut later this month Powell committed that he would accommodate the world’s biggest economy and act appropriately to ensure that it would be able to sustain a decade-long expansion. The USD sold off as a result of the dovish stance of the Fed chair and is now on the verge of breaking significant levels weakening further. Elsewhere, the EUR benefited from Powell's testimony and the FOMC minutes and is presently fighting to hold the 1.1270 under which it should not fall, in order to keep its chances of reclaiming the 1.13 level.
Gold and Oil Edge Higher
Gold prices scaled to a one-week high this morning on a weaker dollar after some rather dovish remarks from the U.S. Fed Chairman. Powell’s statements over the deteriorating state of the global economy kept risk mood in check, pushed the dollar lower and boosted demand for the safe-haven asset which climbed back above the key $1,420 level. It seems gold has every reason to continue its way up in the face of a weakening USD and a weakening economy.
Elsewhere, oil prices also advanced after a massive draw yesterday in the EIA crude oil stocks and as a weaker dollar helped oil prices higher. Crude WTI was able to trade back close to an important resistance at $60,80 this morning that if broken could lead all the way up to $64.
Cryptocurrencies Plummet Amid Massive Sell-Off
Cryptocurrency markets have registered a sharp drop after Bitcoin hit the $13,000 price mark yesterday and was rejected there with a sell-off to the 11.5k support only to drop further testing the 11k this morning. Currently, BTC is re-testing the 11.5k which presently seems to be a resistance that must be overcome to keep the bullish outlook in place. In general, the rejection from 13k this time was a smaller one than the one we saw a few weeks ago when prices went all the way from 13.5k to $10.5k. EOS/USD dipped 20.1%, OmiseGo and Ripple plummeted 18% and Litecoin slid 15.3% as of 8:00 GMT this morning. The massive crypto sell-off may be attributed to Federal Reserve Chairman Jerome Powell’s statements on Facebook’s planned digital currency Libra. Powell said that Libra raises serious concerns regarding privacy, money laundering, consumer protection, financial stability, which need to be publicly addressed.
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