February 1, 2023: Attention Shifts to Powell’s Speech Today

Dollar Steadies Ahead of Rate Decision; All Eyes On Powell

The dollar steadied broadly against other major currencies today, after falling in the previous session after US data indicated a calmness in wage pressures. Investors await the decision of the Federal Reserve’s policy meeting.

The Fed is expected to raise rates by 25 basis points later Wednesday. Still, Fed Chairman Jerome Powell’s press conference will likely capture attention as traders seek clues as to how long the Fed’s tightening tendency will last.

The dollar index fell 0.029% to 102.060. The index fell 0.16% in the previous session, partly due to a report showing that labor costs in the United States increased in the fourth quarter at their slowest pace in a year.

The White House Criticizes ExxonMobil on Skyrocketing Profits

The White House expressed its anger yesterday, Tuesday, because of the revenues achieved by “Exxon Mobil” in 2022, amounting to $ 55.7 billion. The earnings are historic for the company and the entire Western oil sector.

The major oil companies are expected to break their annual records, supported by increased prices and demand, raising their combined profits to nearly 200 billion dollars. This high level has attracted renewed criticism of the oil sector and prompted calls for more countries to impose more taxes on corporate profits.

The White House said in a statement that Exxon’s profit margin is outrageous at a time when Americans are paying record-high prices for fuel. The statement criticized attempts by Republicans in the House of Representatives to move forward with policies aimed at supporting the oil sector.

The White House added that the latest earnings reports show that oil companies have everything they need, including record profits and thousands of new approvals to increase production. However, they are choosing to use those profits to line the pockets of their officials and shareholders. At the same time, Republicans petition the House of Representatives.

Exxon’s chief financial officer, Katherine Michaels, has responded to the growing criticism of the sector’s immense profits, saying that the solution does not lie in raising taxes. Michaels stated that the US has always seen the EU’s taxes on energy as a wrong and inadequate policy. She also said that it is to tax a sector when you need to improve it. She added that raising taxes on companies from the energy sector is counterproductive to what you’re trying to achieve.

ExxonMobil Achieved Over $55 Billion in Profit.

ExxonMobil posted record profits of $55.7 billion in 2022, highlighting the windfall for oil majors after Russia invaded Ukraine despite a slowdown in the fourth quarter as fossil fuel prices retreat from recent highs.

Oil giant ExxonMobil ended 2022 with a profit of $12.75 billion in the fourth quarter, missing Wall Street expectations of $13.7 billion, according to analyst estimates compiled by S&P Capital IQ. The company also incurred $1.3 billion related, in part, to unexpected taxes in Europe. Exxon Mobil is suing the European Union over the tax, arguing that the bloc has exceeded its legal authority. And although the fourth quarter was among the company’s most profitable periods ever, it fell sharply from the record $19.7 billion it generated in the third quarter, a sign of the oil giants’ profit rise slowing in recent months as oil and gas prices plunged, after hitting record levels last summer.

CEO Darren Woods said the company had “benefited from a favorable market.” They returned investments the company made during the pandemic, even as the industry was taking huge losses, to help deliver “leading operating and financial results and returns for shareholders in 2022”.

On the other hand, Exxon’s US competitor Chevron announced its record 2022 profit of $35.5 billion on Friday, putting the US oil giants’ combined earnings for last year at an all-time high of more than $91 billion this year, surpassing the previous peak of $71 billion in 2012.

Exxon said capital and exploration spending last year amounted to $ 22.7 billion. The company also indicated that it raised production by more than 30% in two high-growth regions, namely, “Offshore Guyana” and the “Permian” oil field, in Texas and New Mexico, respectively. It also said it produced more fuel than ever from its North American refineries. In December, Exxon said it plans to spend $50 billion on share buybacks between 2022 and 2024, including up to $35 billion this year and the upcoming year. Meanwhile, ExxonMobil stock rose nearly 50% last year, outpacing its major oil competitors and overcoming the broader S&P 500 index’s decline by 11%.

American Indices’ Gains Bloom.

US stock indices rose at the end of the trading session yesterday, increasing their gains as markets await the results of the work of technology companies and the Federal Reserve meeting.

At the end of the session, the Dow Jones index rose by 1.1%, or about 369 points, to 34086 points, and the index achieved monthly gains in January by 2.8%, which is the most significant monthly gain since last November.

The Nasdaq index rose by 1.7%, or about 191 points, to 11,584 points, and the index achieved monthly gains of 10.7%, which is the most significant monthly gain since July, and it is the most noteworthy gain for the index in the month of January since 2001.

The S&P 500 index rose by 1.5%, or 59 points, to 4076 points, and its monthly gains reached 6.2%, the largest since October.

Today, the markets’ attention is directed toward the Federal Reserve to announce its interest rate decision amid expectations that it will continue to increase rates to control inflation. Moreover, the results of the performance of several major technology companies on Wall Street will be released, most notably Apple, Amazon, and Meta will be announced this week.

Gold is Moving in a Narrow Range. 

Gold moved within a narrow price range on Wednesday, February 1, as investors held back any big bets ahead of the Federal Reserve’s monetary policy decision later in the day.

Matt Simpson, the chief market analyst at City Index, said that gold would remain above $1,900 before the Fed meeting, and the Chair’s message must be heard to know the potential direction of the metal later. Lower interest rates benefit gold, reducing the opportunity cost of holding the non-yielding metal.

The spot gold price fell to $1924.10 an ounce. As for other precious metals, spot silver fell to $23.455 an ounce, platinum fell to $1008.62, and palladium fell to $1647.17.

 Oil Rises with the Rise of Recession Fears.

Oil prices rose on Wednesday, February 1, supported by the decline of the dollar and increased fears that the most significant oil consumer in the world may face a recession due to high-interest rates.

Brent crude futures rose to $85.66 a barrel, while US crude futures rose to $79.21 a barrel, continuing the gains of the previous session, which amounted to about 1%.

Expectations of a quieter interest rate hike helped lower the dollar index, which boosted oil prices, as a lower dollar makes the commodity cheaper for buyers holding other currencies.

Concentration will shift to the OPEC +meeting today. The producing countries are expected to approve their current production targets agreed upon in November.

 Nikkei Index Remains Stable Ahead of the US Federal Reserve’s Decision. 

The performance of Japanese stocks was steady in Wednesday’s session. The Yen slightly declined following the release of manufacturing data in Japan and the anticipation of the US interest rate decision today.

Today, the Federal Reserve is expected to raise interest rates by 25 basis points, with decisions from the Bank of England and the European Central Bank coming later this week.

Factory activity in Japan continued to contract for the third month in a row, as the Jibun Bank Manufacturing PMI read 48.9 in January, unchanged from the preliminary reading.

The Nikkei index settled at the end of the session at 27,346 points, while the Topix index fell slightly by 0.15%, at 1,972 points. The USD/JPY currency pair declined to 129.872.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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