Optimism about a less dovish speech from the Federal Reserve (Fed) Chair Jerome Powell and a ‘not higher than expected’ inflation print earlier this week remained rather short-lived, as other FOMC officials didn’t beat about the bush and hinted at an imminent rate hike in the US. Rate-sensitive Nasdaq fell the most among the major US indices, as losses in the Dow Jones, which is believed to be better equipped to cope with higher rates remained limited.
In the FX, one would’ve expected the US dollar to recover on the back of a series of hawkish comments from the Fed officials, but the dollar index continued to move lower.
Investor attention shifts from macro data to corporate earnings as a couple of big banks are due to release their Q4 earnings today, including JP Morgan, Wells Fargo, BlackRock and Citigroup. There is no doubt that financials will benefit from a rising interest rate environment. But, expectations on bank earnings got quite high, which means that they now they must live up to these strong expectations to keep the rally going.
On the other hand, good earnings are the only thing that could clear investors’ heads from the Fed-induced bearish thoughts.
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.