What you need to know of Thursday, January 28:
Risk aversion took over financial markets mid-London session after ECB Government Council´s member Klass Knot made explicit comments related to future possible central bank policies. According to him, the central bank could decide to cut its deposit rate further below zero if that proved necessary to keep its inflation target in sight, adding that the ECB has tools to counter the EUR’s appreciation if needed.
The dollar appreciated against all of its major rivals and Wall Street plummeted at the opening, eased ahead of the Federal Reserve announcement, and resumed afterwards. US indexes finished the day with sharp losses. The three major indexes lost roughly 2% each.
The US Federal Reserve left rates unchanged at 0%-25%bps Purchases remain unchanged at USD 80 billion USTs and USD 40 billion MB. Policymakers noted that the pace of US economic activity and employment has moderated in recent months. It was quite a dovish statement, although chief Powell added that some developments point to a better outcome later in the year.
Crude oil prices jumped higher following the release of the EIA stockpiles report, which showed that US inventories fell a whopping 9.91 million. WTI settled around 52.65, weighed by the sour tone of equities. Gold finished lower at $1,842.00 a troy ounce.
Commodity-linked currencies were the worst performers, undermined by Wall Street’s slide. AUD/USD and USD/CAD are poised to extend their declines.
EUR/USD held above 1.2060, the 38.2% retracement of its November/January rally. GBP/USD trades sub-1.3700 but the bearish potential seems limited. In general, it seems the dollar is poised to extend its advance.
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AUD/USD remained bid above 0.6500
AUD/USD extended further its bullish performance, advancing for the fourth session in a row on Thursday, although a sustainable breakout of the key 200-day SMA at 0.6526 still remain elusive.
EUR/USD faces a minor resistance near at 1.0750
EUR/USD quickly left behind Wednesday’s small downtick and resumed its uptrend north of 1.0700 the figure, always on the back of the persistent sell-off in the US Dollar ahead of key PCE data on Friday.
Gold holds around $2,330 after dismal US data
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
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Bitcoin (BTC) price has markets in disarray, provoking a broader market crash as it slumped to the $62,000 range on Thursday. Meanwhile, reverberations from spot BTC exchange-traded funds (ETFs) continue to influence the market.
US economy: slower growth with stronger inflation
The dollar strengthened, and stocks fell after statistical data from the US. The focus was on the preliminary estimate of GDP for the first quarter. Annualised quarterly growth came in at just 1.6%, down from the 2.5% and 3.4% previously forecast.