US stocks strengthened today following yesterday's Fed statement interpreted as dovish by the markets. While Powell mentioned that “the possibility of further hikes is not off the table”, investors’ focus now lies on the timing of the first interest rate cuts next year. 10yr US Treasury yield plunged below 4% and stood at 3.91% - the level not seen since July 2023. At the same time, economic data from the world’s largest economy continues to prove that recession, which was expected at the start of the year, has so far been averted. Consumer demand remains robust with today’s retail sales reading surprising on the upside at 0.3% MoM. Labour market continues to show signs of tightness with weekly jobless claims falling 19,000 to 202,000. Elsewhere, both BoE and ECB left the interest rates unchanged, reiterating that the fight against inflation hasn’t finished yet. As the markets believe the Fed will be the first one to cut rates, the dollar lost its attractiveness compared to other major currencies and depreciated below the 102 level. EURUSD and GBPUSD jumped higher and stood at 1.099 and 1.277, respectively.
Base metals shot up higher this morning due to a dovish shift in market sentiment after the Fed's last meeting of the year. That prompted more macro-sensitive metals, such as aluminium and copper, to gap higher on the open. Aluminium recovered most of December's losses, breaking above its long-term average of $2,200/t. This further reaffirms aluminium's mean-reverting strategy being in place. Copper struggled below $8,300/t in recent days, and today's change of narrative prompted prices to strengthen back above $8,500/t to $8,551.50/t. Gains elsewhere were more muted; lead edged higher to settle at $2,069/t. The metal has been testing prices above $2,050/t in recent days as markets searched for an impetus on the upside. Likewise, zinc closed higher at $2,493/t. Nickel saw marginal appetite for higher levels, struggling to break the $17,000/t resistance level, as markets remain uncertain in regard to nickel's trend. The support at $16,000/t remains key as it is close to the close of production for nickel mining, and it is not profitable for physical players to push it below this level consistently.
The decline in yields have raised the attractiveness of precious metals, pushing gold and silver higher to $2039/oz. and $24.18/oz., respectively. Oil has offset the recent losses caused by supply fears with WTI appreciating to $71.8/bl and Brent jumping to $76.9/bl.
All price data is from 14.12.2023 as of 17:30