Trading Plan – Monday 1st August 2022: Powell boosts equities, BoE in spotlight

Mark NugentAug 2022, Trading Plan

Trading Plan – Monday 1st August 2022: Powell boosts equities, BoE in spotlight

Good morning.

The summer holiday service continues (intermittent, text-based communications).

Last week was all about the Fed. On Wednesday, they delivered the expected 75 basis-point interest rate hike. What moved markets was something Fed Chair Powell said: “We are now at levels broadly in line with our estimates of neutral interest rates, and after front-loading our hiking cycle until now we will be much more data dependent going forward.”

The markets interpreted this as the end of big, chunky hikes, and a return to a more normal, and, like he said, data-dependent, hiking cycle. Predictably, equities rose, and the USD fell. I hopped on the S&P500 after Powell’s statement and got out on the last Friday and trading day of the month for a gain of 2.9 percent.

Oh, and by-the-way, the US economy officially entered recession on Thursday.

This week will be dominated by the Bank of England’s Super Thursday on, eh, Thursday. With inflation close to 10 percent, the question is by how much will rates be raised? And can the economy take it?

I will be looking at US equities in the aftermath of Powell’s statement. Are equities going to continue to rise? Has the USD seen its peak? I notice WTI (I am bullish) is sitting at support near the 50DMA. EURUSD has been in a very tight channel for two weeks. Has Powell killed the bears on this pair?

At some point during the week, I will send out your Performance Report for July and year-to-date.