Stocks rally on Fed aftermath and Meta results, ECB plays catch up, oil in no man’s land, gold lower, bitcoin rallies

US stocks are rallying as the Fed has one or two more quarter-point rate rises left in this rate-hiking cycle. The post-Fed playbook was fairly straightforward as traders bought up risky assets after Fed Chair Powell’s dovish tone. ​ Financial markets believe inflation will decline more quickly than the Fed is currently thinking. ​ It is also clear that some traders think that risk appetite can remain if we have a short and shallow recession. With some traders expecting a half-point in rate cuts by the end of the year, investors are scrambling to get back into growth stocks. ​

What is also boosting sentiment on Wall Street is the rise of Meta shares. Meta did everything right yesterday. ​ They posted a solid better-than-expected earnings with impressive ad revenue results, slashed expenses, and announced a massive $40 billion share buyback plan.

ECB
​The ECB raised rates by 50 bps and signaled they could do it again in March. The ECB is behind with rate hikes, so as they play catch up, risk appetite appears to be hanging in there.

ECB chief Lagarde reiterated the stance that they expect growth to stay weak. Highlighting that it should recover in coming quarters. ​ They went from unconditionally hawkish to conditionally hawkish. The ECB will be data-dependent so we should not be surprised if the central bank decides to downshift its rate hiking pace after the March meeting.

Oil
​Crude prices are in no man’s land as the dollar rallies post global major central bank rate decisions and over uncertainty with the outlook for China’s recovery. ​ Risky assets are popping as the Fed nears the end of its rate hiking cycle, but oil is lagging as expectations for a soft and shallow recession remain. ​ The crude demand outlook needs a clear sign that China’s reopening will be smooth and that the US economic growth momentum does not deteriorate quickly.

Gold/Dollar
​Gold prices are lower as the dollar rebounds after the BOE shows they are also almost done with tightening, while the ECB plays catchup with their rate hikes. ​ Gold no longer needs the market to grow more confident that the Fed will be done with tightening, but that rate cuts will happen before the end of the year. ​

Gold seems poised to consolidate around the $1900 level before it can make a run at the $2000 level. ​ Bullion traders will need to see disinflation trends to remain strong and for the labor market to soften for the bull case to remain in place.

Crypto
​We might be getting six more weeks of winter, but it doesn’t seem like we will be seeing an ice age in crypto. January was a robust month for crypto and the FOMC decision helped keep all risky assets going higher. ​ Bitcoin is rallying as the post-Fed rally holds and global bond yields extend their declines. Bitcoin is riding this risk-on mood from Wall Street, but it might struggle to break above massive resistance from the $25,000 level. ​ ​

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