All attention on the Federal Reserve as Jerome Powell delivers his first statement under Biden’s administration

Jan 25 • Market Commentaries • 1138 Views • Comments Off on All attention on the Federal Reserve as Jerome Powell delivers his first statement under Biden’s administration

It’s a busy week for economic calendar events and data releases from the USA. The Fed announces its interest rate decision on Wednesday evening. There is no expectation that the key interest rate will change from 0.25%. At the same time, investors’ attention will turn to the monetary policy announcement made by Jerome Powell (the Federal Reserve chair) after the interest rate gets broadcast. The current loose monetary policy should remain in place.

The latest Q4 2020 GDP is forecast to come in at 4.2% when the newest metric gets revealed on Thursday, representing a significant fall from the massive bounce back figure of 33.4% recorded in Q3.

Earnings reports from Apple, Microsoft, Facebook and Tesla will illustrate how much of the equity price growth experienced over the last ten months is due to profitability rather than hype and speculation. Many NASDAQ 100 firms have experienced a massive surge in demand for their products during the pandemic. Whether this has resulted in increased profitability will be revealed during the earnings’ season.

On Thursday, the latest weekly jobless claims figure will signify the current state of the labour market in the USA. Analysts and investors can only push equity values up so far before the gravity of a failing grassroots economy weighs it down.

President Biden announced a multitude of policies shortly after his inauguration on Wednesday and his determination to get ahead of the COVID-19 pandemic was at the forefront. He also declared his commitment to introduce a minimum wage of $15 per hour, a measure that will prove to be contentious with the opposition Republican party, as they’ll claim it’s an indirect tax rise on business. 

Increasing direct taxation is the elephant in the room for both political parties, and Biden suggested during his election campaign taxes must rise for the wealthy and elite in the USA.

The task facing the USA; trying to rebuild a pandemic ravaged economy and society is massive. The unemployment/underemployment rate is off the scale, and the poverty rate has exploded. Homelessness is rising exponentially while hospital admissions for COVID-19 are at approximately 130,000.

Biden addressed these concerns during his first speeches. It’ll be fascinating to witness how he takes these and other significant issues on during the first few months of his presidency.

The UK employment and unemployment data will get published on Tuesday. Analysts forecast that 160K jobs disappeared in October, and the unemployment rate increased marginally to 5.1% in December. However, the headline metrics don’t consider the 3.8 million extra adults accessing Universal Credit since the pandemic or the 7 million workers on leave (furlough). If both economic and societal crutches get removed (furlough and UC), employment and unemployment figures in the UK would be abysmal.

US equity markets, oil and precious metals have experienced rises so far in 2021

The leading US equity indices closed last week up, with the NASDAQ rising by 4.35% weekly as markets initially rallied after Biden’s inauguration. Friday saw a sell-off and profit-taking as sobriety returned.

USD came under pressure during last week’s trading sessions, and the DXY ended the week down -0.62% but up 0.30% year-to-date. USD lost ground in the previous week versus EUR, GBP, CHF and JPY. The focus will be on the value of USD during the week due to the GDP data publication, the Federal Reserve interest rate decision and the Fed’s monetary policy forward guidance.

Due to the promise of improved global trade, the crude oil price has risen sharply over recent weeks. The 2021 gains are 7.73% with a barrel costing over $52; quite a recovery from the negative cost of a barrel experienced in April when the shock of COVID-19 reverberated throughout the global economy.

Precious metals enjoyed significant price increases during 2020. That momentum has stalled occasionally in 2021. However, gold, silver and platinum have registered gains during the past week—gold up 1.57%, silver up 3.03% and platinum up 2.28%. Platinum is up over 8% monthly and reached a high not seen for eight years last week.

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