Forex
The US Federal Reserve has been increasing interest rates in order to restore price stability and labor market balance. The demand for new hires in the United States is surpassing the supply of available workers, as the unemployment rate has dropped to its lowest level in over 50 years, contributing to higher inflation.
According to IMF analysis, staying the course and maintaining interest rates high this year will help to bring the economy back to equilibrium. Although higher interest rates will momentarily increase unemployment, they will make way for stable inflation and long-term economic growth, which will eventually help create more jobs
The market is becoming increasingly pessimistic about the Fed's future actions. This fundamental factor will provide background support to EUR/USD bears, who are currently attempting to keep the pair within the 6th figure. The immediate support level is now at 1.0650, which is the cloud's upper boundary.
GBP/USD showed strength on February 21 following the release of preliminary PMI report, which came in better than expected. As a result, the manufacturing PMI increased to 49.2 from 47.0, exceeding market expectation of 47.5. The services PMI increased to 53.3 from 48.7, exceeding forecasts of 49.3. Meanwhile, the composite index rose to 53.0 from 48.5, exceeding the predicted 49.2. Clearly, the couple grew after that, albeit slowly. Investors appeared taken aback by the results at first, and their reaction took some time to emerge.
AUDUSD attempted a bullish reversal on February 20 following the weakening of USD. However, the currency pair failed to keep up the bullish momentum and rejoined the overall downside rally, pushing the price below $0.68500 on Thursday (February 23).
USDJPY continues the robust bullish move initiated on February 3rd (Friday) following the rising non-farm employment rate and an improved unemployment rate in the US. The pair has experienced a gain above 3.67% within the first three weeks of February.
Silver (XAGUSD) remains overall bearish throughout the first three weeks of the current month.
Commodities
On February 22, oil prices fell by $2 for each barrel to their lowest level throughout the month as investors became concerned that the latest information would prompt central banks to raise interest rates more aggressively, putting pressure on economic growth as well as fuel demand.
Brent crude futures are fixed at $80.60 per barrel, down $2.45, or 3%. West Texas Intermediate crude futures fell $2.41, or 3%, to $74.05 per barrel.
Gold (XAUUSD) suffered further losses on Thursday (Feb 23), forcing the price below $1830 following weak demand in spot markets. The 200 EMA, which is situated at 1,864, could be reached if the price rallies and consolidates above 1,840.
Technically, the USDX is under correction after it hit the 6-week highs Wednesday, and as a result, US Treasury yields are decreasing. It may be advantageous for gold if the currency continues to experience technical corrections.
Nevertheless, silver hasn't lived up to the hype yet and has instead traded in a constrained band on either side of $24 per ounce. The gold-silver ratio has risen above 80, which is a consequence of silver's inaction.
Investors who are becoming disenchanted with silver's lackluster beginning to the year should remain cautious. The argument for silver continues to be compelling, and given how long the price has been stable, it should have ample support to push it higher as quickly as the catalyst appears to kickstart it. The argument for silver rising to $30 per ounce still outweighs the argument for it to fall to $20.
Indices
The S&P 500 index has risen by almost 6.5% so far in 2023, but year-over-year gains have not yet been seen as the US stock market begins its second year of a Federal Reserve's hawkish and restrictive monetary policy.
The US benchmark indicator started to recover toward the end of the previous year, rising from a low of 3,491 points, which was almost two years ago, to a close of 4,081.40 points on February 9, 2023.
Meantime, Dow Jones suffered a decline of 84.50 points (-0.26%), pushing the index to a further downside target near 33,050. The Nasdaq Composite, on the other hand, gained over 0.13%, keeping the index above 11,500.
Market Events
Fed officials, including FOMC voting members Barkin and Bowman, were tight-lipped about the size of future rate hikes. Smaller rate hikes were preferred by Barkin for their versatility, while Bowman simply stated that the Fed wasn't really done fighting inflation. The core PCE price index, the Fed's preferred inflation metric, is due to publish on February 24 (Friday).
Canada’s monthly GDP and the CB Consumer Confidence of the US will be published on February 28. These two market events may significantly impact how financial markets close in February 2023.
