TREX Global:The Federal Reserve’s resolution is coming, beware of double kills by longs and shorts!

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U.S. labor cost growth slows in fourth quarter, but labor market remains tight

U.S. labor costs grew at their slowest pace in a year in the fourth quarter as wage growth slowed, giving the Fed a boost in its inflationary battle.

There was more encouraging news on inflation, with data on Tuesday showing home price gains slowed sharply in November. The reports came as Fed officials began a two-day policy meeting. The Fed is expected to further slow the pace of rate hikes on Wednesday, raising the policy rate by 25 basis points.

While the Fed has slowed its pace of rate hikes, it is unlikely to stop tightening monetary policy.

The Fed's "Beige Book" report this month described the labor market as "persistently tight," noting that "wage pressures remained elevated across the Fed districts" in early January, although five districts' "Reserve banks reported that those pressures had eased." ".

While the annual increase in average hourly earnings has slowed in the Labor Department's monthly jobs report, wages remain high. The Atlanta Fed's wage tracker also fell, but remained elevated in the fourth quarter.

The tightness of the labor market can also be fully reflected in another report from the World Enterprise Research Institute. The so-called employment difficulty index of its consumer survey rose from 34.5 in December to 36.9 in January. The data comes from respondents' perceptions of whether jobs are plentiful or hard to come by.

This measure correlates with the Labor Department's unemployment rate, and a rise indicates tight labor market conditions. The government will publish job vacancies data for December on Wednesday. There were 10.5 million job vacancies on the last working day of November.

The Fed's current cycle of rate hikes, the fastest since the 1980s, is holding back house price gains.

The S&P CoreLogic Case-Shiller National Home Price Index, which covers all nine U.S. census tracts, rose 7.7 percent in November from a year earlier, down from a 9.2 percent gain in October.

Home prices, as measured by the Federal Housing Finance Agency (FHFA), rose 8.2 percent in the 12 months through November after climbing 9.8 percent in October. However, a persistent shortage of homes for sale may prevent prices from falling sharply.

Labor cost data weighs on dollar

The U.S. dollar index rose and fell on Tuesday, hitting a nearly two-week high to 102.61 earlier, but data showed that labor costs in the U.S. rose less than expected in the fourth quarter, and the market expects the Fed to announce a rate hike of only 25 basis points on Wednesday. After the announcement, it turned from up to down, closing at around 102.10, a drop of about 0.12%.

U.S. Treasury yields fall as data shows U.S. wages, home price growth slowing

The 10-year U.S. Treasury yield retreated from a two-week high on Tuesday after economic data showed slower U.S. wage growth and a cooling housing market, with shorter-dated yields on track for their biggest monthly drop in nearly three years.

Top hawkish official hints at Fed rate hike pause in May

If there is more evidence that U.S. inflation is cooling down, media analysts say the Fed is expected to consider pausing interest rate hikes after its March meeting. In other words, the Fed may not raise interest rates at its May meeting.

The pause in raising interest rates in May was based on a timetable hint given by the Fed's senior hawkish official and voting governor Waller. Waller was an early advocate of the Fed's strategy of frontloading rate hikes.

Eurozone Q4 GDP surprises, avoids recession

The euro zone narrowly managed to grow in the final three months of 2022, avoiding recession, despite the impact of high energy costs, weakening confidence and rising interest rates on the bloc's economy, Eurostat data showed on Tuesday.

Gross domestic product (GDP) in the euro zone rose 0.1 percent in the fourth quarter, beating expectations for a 0.1 percent decline in a Reuters poll. Compared with the same period last year, it increased by 1.9%, higher than the expected increase of 1.8%.

Among the top euro zone countries, Germany and Italy recorded negative growth in the fourth quarter, but France and Spain expanded, Eurostat added, based on preliminary estimates that are subject to revision.

IMF raises 2023 economic growth forecast

The International Monetary Fund (IMF) on Tuesday slightly raised its global growth forecast for 2023, citing "amazing resilience" in demand in the United States and Europe, easing energy costs and the reopening of China's economy after it abandoned strict coronavirus restrictions .

The IMF's latest "World Economic Outlook" predicts that the global economic growth rate in 2023 will still drop from 3.4% in 2022 to 2.9%, but it has improved from the 2.7% growth predicted in October last year; prone to recession.

Reuters poll: The average price of gold is expected to rise to $1,852.50 an ounce in 2023

A Reuters poll on Tuesday showed analysts and traders had sharply raised their forecasts for gold prices, but expected higher interest rates to keep prices in check.

Spot gold fell from more than $2,000 an ounce to a low of $1,613.60 in 2022 as rising interest rates pushed up bond yields and the dollar, making dollar-denominated non-yielding gold less attractive.

The survey of 38 analysts and traders put gold at an average price of $1,825 an ounce in the first quarter of this year, $1,840 in the second quarter, $1,852.50 for the year and $1,890 in 2024.

TREX Global’s view:Concerns about the global economic recession have cooled down, which will limit the upside of gold prices in the medium and long term, but in the short term, the market expects that the US labor market may encounter some problems, and the employment data for January is not optimistic , The expectations for the U.S. PMI data in January are poor, and the Fed's interest rate decision is also difficult to be very hawkish, which will provide opportunities for further rises in gold prices.

What needs to be reminded is that the Fed’s interest rate resolution and Fed Chairman Powell’s speech at the press conference are unlikely to be overwhelmingly hawkish or overwhelmingly dovish. It is expected that the price of gold will also face wide fluctuations in the intraday session and see-saw between long and short Investors need to be vigilant against the possibility.

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