Fed Day Alert: All Ears on Powell for Jan 2024 Rates

After nearly two years of strategically raising interest rates to combat inflation, the Federal Reserve's efforts have proven successful in curbing the rapid rise in prices.

Now, with the first-rate meeting of 2024 on the horizon, traders are eagerly speculating about what Jerome Powell will say for the Fed to change gears and initiate rate cuts, bringing a new shift in monetary policy.

So, let's get into to it and explore how this effects the different asset markets:

Go For Gold, A Bullish Market on The Horizon

 

The probability of a rate cut in March has decreased with the market pricing it at around 44% currently, compared to 90% just a month ago.

As a result, gold prices declined by approximately 3.41% in January. However, as Core Personal Consumption Expenditure (PCE) data revealed that inflation is slowing down at a faster rate than expected.

This could signal that the Federal Reserve might shift its attitude towards the economy. So BitDelta Traders will have to watch out for Powell tone today at the Fed Meeting for any hints on how they plan to exit the high interest rate environment

Dollar Under Reduced Bond Pressure

 

Financial indicators play a crucial role in understanding the market's direction. The Dollars Index (DXY) is one such indicator that measures the strength of the US dollar against a basket of other currencies.

Recent developments, such as reduced bond issuances by the Treasury Department, have put pressure on the weakening dollar.

FYI, when the Treasury issues fewer bonds, it means they are borrowing less money from the public or financial institutions, and when the government borrows less money, it can make the dollar weak

Why?

Because it raises worries about the economy and makes people less confident in the currency.

Additionally, market sentiment is influenced by events like the Federal Open Market Committee (FOMC) meetings and the Nonfarm Payroll (NFP) data release.

By analysing these factors, traders can gain insights into potential trends in DXY, allowing them to make informed decisions when trading currency pairs.

Impact on GBPUSD

 

One of the key factors influencing currency pairs like GBPUSD is the interest rate decision by central banks, such as the Bank of England (BoE).

On February 1st, the BoE is set to announce its decision regarding interest rates. To manage inflation effectively, central banks often emphasise the importance of a restrictive monetary policy.

For context, the BoE maintained a benchmark interest rate of 5.25% in December, with a majority vote in favour of keeping the rates unchanged. However, some BoE members advocated for a rate hike due to a tight labour market combined with persistent inflation.

As someone who might be getting into trading or is an expert trader, it's essential to understand the impact of interest rate decisions and inflation on currency pairs. By staying informed about these factors, you can make more informed decisions when trading GBPUSD, anticipating potential movements, and utilising this knowledge to maximise your potential gains.

Buy the Dip: A Winning Strategy for MSFT

“Buy the dip”: a very popular expression across the cryptocurrency industry. If you haven’t heard of it yet (pretty impossible) ... well, we got some news for you.

Imagine investing in a company like Microsoft (MSFT), only for its stock price to temporarily drop. By making use of this strategy, you can seize the opportunity to add MSFT to your portfolio at a potentially lower price.

Currently, MSFT is moving steadily within a parallel channel, suggesting an ideal time to apply the "buy the dip" strategy. This involves patiently waiting for the stock price to dip within the channel and then making your move to buy.

Capitalising on Tech Stocks: NASDAQ the Rising Star:

Tech stocks, including companies – like Microsoft, Alphabet, Apple, Amazon, and Meta – are often at the forefront of market trends. Positive sentiment surrounds these companies due to the increasing practicality of Artificial Intelligence (AI) in the real world.

NASDAQ, the index that represents these tech giants, has experienced a positive growth, driven by the advancements in AI technology.

 

Key levels to watch for potential buying opportunities would be 17381 and 16547.

Remember by aligning fundamental analysis with technical analysis, you can make educated decisions on entering or exiting positions within this dynamic market.

So to ensure you are keeping track on the data releases and maximising the most out of the markets, Sign up or Log in to your BitDelta account today to and start trading.