Traders weigh Fed's caution

Global markets hold steady amidst holiday lull

By Ahmed Azzam | @3zzamous | 22 November 2023

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  • Trading gets thinner ahead of holidays in the US and Japan

  • FOMC plans cautious rate moves tied to inflation progress

  • FOMC awaits evidence, considers past rate impacts on inflation

  • Key data: Jobless claims expected at 228,000; October durable goods down 3.2%

Stocks across global markets exhibited minimal movement within narrow ranges, maintaining a cautious stance as the dollar lingered close to its weakest level in nearly three months. The subdued market sentiment prevailed ahead of national holidays, with an Asian equity benchmark gauge displaying marginal changes. Notably, artificial intelligence stocks experienced a decline, spurred by lukewarm investor response to Nvidia Corp.'s earnings report. Futures for European and U.S. stocks mirrored this lack of momentum, reflecting a muted trading environment leading up to Japan's holiday and the upcoming U.S. Thanksgiving on Thursday.

FOMC's cautious rate approach

The Federal Open Market Committee (FOMC) underscored a united strategy to "proceed carefully" on interest rate adjustments, revealing minutes from their recent meeting. The committee expressed a commitment to tying any future rate hikes to progress toward their inflation target. While acknowledging a moderation in inflation over the past year, FOMC officials emphasized the need for additional evidence before gaining confidence in achieving the 2% inflation goal.

FOMC policymakers highlighted the comprehensive approach they would adopt in assessing the impact of prior interest rate hikes, considering time lags associated with monetary policy's influence on economic activity and inflation. The officials also emphasized the importance of monitoring developments in both the economy and financial markets. During a press conference, Federal Reserve Chair Jerome Powell suggested that the September dot-plot, which indicated a majority of participants forecasting one more rate hike this year, might no longer be accurate. Powell clarified that the FOMC had not engaged in discussions about rate cuts, with the primary focus remaining on the potential need for additional rate hikes.

Key data watch

In terms of economic indicators, the upcoming data release includes an expected dip in weekly jobless claims to 228,000, coupled with an anticipated 3.2% drop in October durable goods orders. These figures will be closely watched for insights into the economic trajectory, particularly amid the FOMC's cautious approach to interest rate adjustments.