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Sentiment upbeat on dovish Fed ahead of key US data

Fawad Razaqzada Fawad Razaqzada 29/07/2021
Sentiment upbeat on dovish Fed ahead of key US data Sentiment upbeat on dovish Fed ahead of key US data
Sentiment upbeat on dovish Fed ahead of key US data Fawad Razaqzada
  • European stocks and US futures in positive
  • Dollar lower on dovish Fed
  • Gold and silver break higher
  • Bitcoin holding above $40K
 
Markets addicted to QE sighed relief on Wednesday after the Fed Chair Jay Powell said more ground was needed to be covered before tapering bond purchases. The Fed’s inaction means investor sentiment remained overall positive after earnings results from several big tech giants easily beat expectations. However, concerns over sky-high valuations and rising cases of Covid variants in the US and elsewhere kept the upside limited for stocks, although gold and silver got a boost as the dollar weakened and real yields remained depressed.

DXYSource: ThinkMarkets and TradingView.com
 
At the FOMC press conference last night, Federal Reserve Chair Jay Powell said: “We’re not there [to start tapering QE]. And we see ourselves as having some ground to cover to get there.” The Fed re-iterated that “substantial further progress” was needed to be made on employment and inflation before reducing its asset purchases from the current pace of $120 billion a month.
 
The Fed’s inaction was met with a bit of cheer as some investors had anticipated the Fed to have been a bit more hawkish in light of further improvement in US economic data since their previous meeting in June and given the rapid rise in inflation. What’s more, the somewhat hawkish tone of the July policy statement, was not echoed at the FOMC press conference by Powell.
 
The market’s focus will now turn back to the economy to see how much further progress it has made and likely to make in the coming months.
 
  • First up is the US second quarter GDP estimate later today at 13:30 BST. The world’s largest economy is expected to have grown 8.5% in an annualised format (quarterly x4), which would be an acceleration from the 6.4% growth recorded in Q1.
  • Today we will also have the latest weekly jobless claims data and pending homes sales. Claims area expected to have dropped back to 382K after the previous week’s unexpected rise to 419K. Pending home sales are expected to have only edged up by 0.1% m/m after surging 8.0% the previous month.
  • Meanwhile, the Fed’s favourite measure of inflation will come in on Friday in the form of the PCE core price index.
Next Friday will see the release of the July non-farm jobs report, which is going to be very important considering the fact the Fed is now just waiting to see a bit more improvement in the labour market before starting to reduce the expansion rate of its balance sheet. We will also have the ISM PMIs and ADP payrolls report all to look forward to from the US.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Fawad Razaqzada
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Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Kearabilwe
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Kearabilwe Nonyana
Market Analyst, South Africa

Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives. His career in the financial markets has seen him hold various positions in global investment banks and global CFD and Spread betting firms. He has deep interest in using quantitative methods to help him understand and teach the fundamental drivers of asset prices.
 
 
 

Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Kearabilwe
Kearabilwe Nonyana
Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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