. Anticipation of Powell's Monetary Policies Impacting Markets:

Anticipation of Powell’s Monetary Policies Impacting Markets: Decline and Implications

Anticipation of Powell’s Monetary Policies Impacting Markets: Decline and Implications

19 May 2023

Markets are declining in anticipation of Powell’s monetary policies.

Debt limit discussions and the USD resurgence are dominant.

The expectation and confidence that a deal to increase the US debt ceiling will be put on the table for a vote next week is expected to boost the mood in the financial markets as they close off their weekly trading session today. Where there is smoke, there usually is fire, but this is one update that can offer some solace to all of us who are keeping an eye on the world’s financial markets, so long as it prevents the possibility that the United States could run out of money in two weeks.

In the coming week, all news coverage is likely to be dominated by the US debt ceiling negotiations.

EUR/USD to struggle to find 1.08

The EURUSD is failing to make a compelling attempt to recapture 1.08 at the end of the trading week today. It has fallen by just over 1.2% as of the time of writing this week. The knockback to global economic confidence following the Chinese macro releases a few days ago and a hook from a stronger USD moving higher against its equivalents are two reasons that have worked against the Eurodollar this week.

Technical price movement can also be linked to the Eurodollar’s short-term problems. Following the recent ECB interest rate decision, the EURUSD was unable to surpass 1.10, which diminished expectations for a rebound in the Eurodollar this month.

Sellers unexpectedly back in control for Gold

After Gold unexpectedly fell below $2,000 this week, sellers lost no time in acting and pricing in quick falls.

At the time of writing, the precious metal was trading just above $1965, and we can conclude that sellers are once again in charge of the market movement. Longer term, gold prices are still at historically high peaks. Additionally, there are still more than enough good reasons to believe in gold. However, after the first half of May was predominately driven by buyers, the break below $2,000 this week completely turned the scales in favour of selling.

We may anticipate Gold to trade sensitively in response to any stories that may emerge next week, which appears to be the week that will be dominated by US debt ceiling news flow. There is a chance that the United States could run out of time and risk having to face the consequences of a potential default until there is an unquestionable answer to this problem. Even though it seems improbable given that everyone is aware that the current impasse is an act, next week’s gold price action could attempt to capitalise on news of this nature.

As the weekend approaches, oil prices are above $70.

Today marks the end of the trading week, and oil seems to have succeeded in keeping its head above water at $70.

At one point, it seemed as though the commodity would fall back into the $60 level as the global economy took a hit from disappointing China data reports at the start of the week, but it now seems that Oil has escaped this difficulty. at least right now.

Looking ahead to the coming week, the uncertainty around the debt ceiling may be exposed.

Even though the current impasse initially has no effect on macroeconomics, the warnings that a failure to settle the debt ceiling issue could be “catastrophic” have evident financial market repercussions. Oil will always be regarded as a risky asset to keep in a portfolio, and in the context of emerging markets, it is conceivable that it may even be the most liquid asset one can own.

Therefore, if the debt ceiling political impasse causes financial markets to crash, oil would likely be one of the first assets that investors sell.