Daily Alert – Thursday 2nd February 2023: Markets look into Powell’s soul and see a dove

Mark NugentDaily Alert, Feb 2023

Daily Alert – Thursday 2nd February 2023: Markets look into Powell’s soul and see a dove

Good evening.

Well, if Fed Chair Powell had wanted to be hawkish, he failed. During his press conference, his answers to some questions were distinctly dovish, or at least not as hawkish as they could have been. The traders pounced on this. Equities up, USD down.

The ECB were not as in-your-face hawkish as they have been recently. Euro down.

The Bank of England talked about an end to hiking by mid-year. Dovish. GBP down.

So, what does it all mean? Well clearly the markets think the inflation thing is over. The peak is in the rear-view mirror and it’s time to stoke-up those animal spirits. The central bankers are more cautious, as you would expect, seeing themselves with work still to do, which is correct, as they have yet to fulfil their inflation mandates. But the markets are done with inflation.

You cannot fight this. I went long on S&P500. It was an obvious trade and is around 1x risk in-the-money.

I’ll be back tomorrow with your Performance Report for January.

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