Daily Alert – Wednesday 1st February 2023: Will the markets hear Powell this time?

Mark NugentDaily Alert, Feb 2023

Daily Alert – Wednesday 1st February 2023: Will the markets hear Powell this time?

Good evening.

The markets are quiet ahead of tonight’s Fed rate-setting announcement. The expectation is a 25 basis-point hike and very hawkish rhetoric from Chair Powell as he tries, again, to make the markets understand he is serious about quashing inflation, that rates could well go above 5 percent and stay there for some time, and there will be no cut this year, as markets are predicting.

It is important for him to head-off the market’s unfounded positivity as that makes his inflation-cutting mandate harder to achieve.

If the markets finally “get it”, we would expect equities to fall and the USD to strengthen. I think there’s a good chance the markets will finally hear Powell. The famous Dr Michael Burry who made a fortune betting against the US housing market (see the movie The Big Short) published a single word tweet earlier. The word was “sell”. Bloomberg wrote a 600-word article about it.

We’ll see.

I’ll be back tomorrow after the rate announcements from the European Central Bank and the Bank of England. There will be a lot to talk about.

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