Forexlive Americas FX news wrap: Fed’s Waller gives the market a boost to end the week

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There was little economic data today, but there was some final Fedspeak to end the week. It would also be the last chance for Fed officials to speak before their blackout period before the Fed meeting and decision in February. Fed’s George and Waller both spoke. George is not a voting member and is retiring in 2023. Her comments saw limited reaction.

However, Fed’s Waller was the main event as

  1. He is a member of the Board of Governors so he has a permanent vote,
  2. He hasn’t spoken since November. So what he said would be “new”-ish
  3. He is more than a hawk. So if there is a change, it could be positive for stocks, negative for the dollar

His comments had the usual playbook, but he began by saying that 25 basis points is good in February. He sees the rate moving higher and the rate remaining constant in 2023.

However, he also had some positive things to say about inflation, but the most impactful comments were when he said that 2022 was humiliating, and followed that comment by saying:

  • If markets are right and inflation comes down, that’s great news. Would have no problem changing policy.

HMMM… Usually, the Fed members get on their high horse and say this is what we’re going to do, this is what we expect. I loved hearing “humble” and a willingness to bend the other way because it would be “great news”.

US stocks were higher ahead of his speech and Q&A with the:

  • Dow rose 0.29%
  • S&P rose 0.86%
  • NASDAQ rose 1.48%
  • Russell 2000 rose 0.76%
  • 2-year yield 4.183%
  • 10-year yield 3.488%

The returns do not change much before and after Wallers speech. However, the 2-year was still down -6.4 basis points this week and the 10-year down -2.6 basis points, although the Fed is still looking to hike at least twice more in 2023.

In the stock market, the major indexes have seen some buying return on hopes that “the market” will be right and the Fed will be wrong (and they humbly respect that).

So, the final stock numbers are closing higher, but for the week, the Nasdaq posted a gain for the week (thanks to today) but the S&P and Dow were lower.

  • The Dow rose 330.91 points or 1.00% at 33375.50 today. During the week the Dow fell -2.7%
  • S&P rose 73.74 points or 1.89% at 3972.69 today. During the week the S&P was down -0.66%. The index closed level back above its 200-day moving average at 3968.87, which sends traders home happy for the weekend with hopes for more follow-through next week.
  • NASDAQ index rose 288.18 points or 2.66% at 11140.44 today. For the trading week, the index gained 0.55%. It was the third week in a row higher for the NASDAQ index.

IN the forex today, the NZD and AUD moved higher helped by “risk on” flows. Both moved back above their 100 and 200 hour MAs tilting the bias back to the upside for each against the USD. The JPY was the weakest. The USD was lower to mixed with gains against the JPY and CHF and declines against the NZD (-1.31%), AUD (-0.91%) and the CAD (-0.64%) leading the way.

The strongest to the weakest of the major currencies today

For the trading week, the USD was mostly lower with the exception of a gain against the JPY and unchanged against the AUD. The USD saw the biggest decline against the GBP (-1.44%) and the NZD (also -1.44%).

  • EUR, -0.23%
  • JPY +1.33%
  • GBP -1.44%
  • CHF -0.66%
  • CAD -0.13%
  • AUD unchanged
  • NZD -1.44%

Source

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