Despite the ultra-hawkish measures taken to combat inflation in the US, the desired results have not been achieved, which has led to the possibility of further interest rate hikes.
In his speech to the Senate Banking, Housing, and Urban Affairs Committee yesterday, Powell stated that recent economic data has been stronger than expected, indicating that the final level of interest rates may be higher than previously estimated.
Powell emphasized that restoring price stability would likely require a more restrictive monetary policy stance for some time, stating, “If the sum of the data indicates that a more rapid tightening is necessary, we are prepared to increase the pace of interest rate hikes.”
Following Powell’s remarks, the probability of a 50 basis point interest rate hike at this month’s Fed meeting increased to 74%, while pricing indicating that the final interest rate could rise to 6% also gained strength.
Analysts noted that with Powell’s comments today in the House of Representatives and the focus of investors on ADP private sector employment data in the country, market volatility could continue.
Analysts pointed out the importance of non-farm payroll data to be announced in the US on Friday, stating that the February data could provide a clearer picture of the labor market after the surprise increase in January and that pricing in the money markets could be reshaped.
Yesterday, after Powell’s remarks, the dollar index gained 1.2% to 105.6, while volatility was observed in the bond and commodity markets.
While the US 10-year bond yield rose above 4% again, the 2-year bond yield exceeded 5% for the first time in about 16 years. On the other hand, the 5-year bond yield rose to 100 basis points above the 10-year bond yield for the first time since 1981.
After gold ounce price dropped 1.8%, silver ounce fell 4.5%, and Brent crude oil barrel price decreased by 3.7% yesterday, commodity prices are relatively stable in the new day.
Yesterday, the S&P 500 index fell by 1.53%, the Dow Jones index fell by 1.72%, and the Nasdaq index fell by 1.25% on the New York Stock Exchange. Futures contracts for the indices in the US have started today with limited gains.
Similarly, European stock markets also saw a selling trend following the US markets. The upcoming macroeconomic data releases are expected to have an impact on the market pricing. Yesterday, the DAX 40 index in Germany fell by 0.60%, the CAC 40 index in France fell by 0.46%, the MIB 30 index in Italy fell by 0.67%, and the FTSE 100 index in the UK fell by 0.13%. The futures contracts for the indices in Europe have also started today with a selling trend.
In Asia, the markets are mixed today, with technology companies losing value due to increasing bond yields. According to data released in Japan, the balance of payments deficit in January was JPY 1.977 trillion, which exceeded expectations. At the close, the Nikkei 225 index in Japan rose by 0.4%, while the Shanghai Composite index in China fell by 0.6%, the Kospi index in South Korea fell by 1.3%, and the Hang Seng index in Hong Kong fell by 2.7%.
In Turkey, the BIST 100 index on the Istanbul Stock Exchange fluctuated and closed the day 0.19% lower than the previous day at 5,381.90 points. The USD/TRY exchange rate closed at 18.9235 with a 0.1% increase yesterday and is currently trading at 18.9250 in the interbank market.
Analysts noted that today, along with Fed Chairman Powell’s statements, the growth in the Eurozone, the ADP private sector employment report in the US, and the Fed’s Beige Book report will also be monitored. From a technical perspective, they stated that the resistance levels for the BIST 100 index are 5,500 and 5,600, while the support levels are 5,340 and 5,200 points.
