It is said that those who do not learn from history are bound to repeat it. Unfortunately, it would seem that this adage is all too applicable to today's Federal Reserve. Historically, the Federal Reserve has never been right on monetary policy and has a proven track record of getting it 'wrong' on inflation, time and time again! Throughout the whole of 2021, the Federal Reserve played down the biggest year-on-year rise in inflation seen in more than four decades – characterizing the record spike as "transitory". And that wasn't the first time. Before that, it was the 1970s and early 1980s, when the Fed slowed down the pace of rate hikes too fast – only to see inflation surge once again. Had the Fed learned from the painful inflationary experience of the past, they would know that there are almost always "three waves of Inflation". We all make mistakes, but the Federal Reserve may be making a bigger one than most by prematurely declaring victory on inflation too soon. This ultimately means that the Fed has removed all obstacles and cleared the path for Commodity prices to take off – presenting traders with "one of the greatest wealth creation opportunities the world has ever seen". Since the beginning of this year, a long list of leading Wall Street banks from Goldman Sachs, JPMorgan to Bank of America have been predicting that Commodities prices will hit new record highs in 2023. In recent days, that chorus has once again become louder with a growing list of financial institutions, advising clients to pile back into commodities now – ready for the next big leg higher! Whichever way you look at it, one thing is clear. Jerome Powell and his colleagues at the Fed has given a green light to the Commodities Supercycle. That's welcoming news for the bulls, but painful for bears and anyone sitting on the sidelines, who must now decide how much FOMO they can handle. Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

The dollar index jumps to three-week high on Friday, following hot US labor report (Jan 517K vs 185K f/c) and upbeat non-manufacturing PMI (Jan 55.2 vs 50.4 f/c and Dec 49.2) that greatly improved dollar's sentiment. The greenback extends strong bullish acceleration into second consecutive day, generating bullish signal on break through trendline resistance at 101.98 (bear trendline drawn off 113.02 multi-year high). The action is supported by improving daily studies as 14-d momentum broke into positive territory and 10/20DMA turned to bullish configuration, along with initial signs of formation of reversal pattern on weekly chart, though with more action required for verification. In addition, formation of a bear-trap pattern on monthly chart (below 50% retracement of 89.15/114.72 rally) contributes to positive signals. Bulls eye initial target at 103.04 (daily Kijun-sen), guarding weekly cloud top (103.81) break of which would boost positive signals for stronger recovery. Weekly close above broken trendline is needed to keep fresh bulls in play. Res: 102.73; 103.04; 103.58; 103.81 Sup: 101.98; 101.70; 101.36; 100.95

US non-farm payrolls surprising beat expectations U.S. non-farm payrolls (NFP) came in significantly better than expected last month, pushing the unemployment rate to a multi-decade low. Payrolls for January came in at 517,000, which was higher than the 185,000 many were anticipating. The figure was also double that of December's number which was revised higher to 260,000 jobs. As a result of today’s figure, unemployment in the United States fell to 3.4%, which is its weakest point since May 1969. The S&P 500 remained close to a 6-month high on the news. Apple report disappointing Q4 earnings Shares in Apple moved higher on Friday, despite the company reporting disappointing quarterly earnings. Following Thursday’s closing bell, Apple reported that revenue for Q4 had come in at $117.15 billion, lower than the expected $121.10 billion. This was down 5.49% from the previous year, and came as earnings also disappointed, coming in at $1.88 versus $1.94 per share. Apple CEO Tim Cook, blamed the current global economic downturn, and rising inflation as some of the reasons for the poor performance. Cook also stated that, “We’re also recognizing the environment that we’re in is tough. And so we’re cutting costs. We’re cutting hiring, we’re being very prudent and deliberate on people thatwe hire.”

RBA rate decision – 07/02 – back in November the RBA hiked rates by a less than expected 25bps, amidst concern about the effects recent rate hikes were having on the Australian economy and ergo the housing market. At the time Governor Philip Lowe said that the RBA wanted to slow the pace in order to better judge the lag effects of previous hikes which could take time to trickle down. In December they followed this with another 25bps hike pushing the headline rate to 3.1%, while forward guidance was left unchanged, with the bank warning that rates were likely to increase in the coming months. While the RBA’s caution is understandable given the fragile nature of its housing market there is a risk that they run the risk of allowing inflation to get much more of a toehold in the wider economy. These fears took on a greater life in January when the latest December CPI numbers showed a bigger than expected jump to 8.4%, from 7.3% in November. For Q4 this pushed the average rate to 7.8% from 7.3%, raising concerns that the RBA might have to be more hawkish in terms of what to do later this week, when it comes to looking to tighten policy further. Expectations are for a rise of 25bps however we could see a 50bps move given those recent inflation numbers. UK Q4 GDP – 10/02 – having seen the UK economy contract in Q3 to the tune of -0.3% there had been a widespread expectation that Q4 would see a similar contraction, officially putting the UK economy into recession. A lot of the reason for that Q3 contraction was a collapse in economic activity in September due to the funeral of Queen Elizabeth II. This slowdown saw a big rebound in October which saw a monthly expansion of 0.5%, and was then followed by a 0.1% expansion in November which confounded expectations of -0.1% decline. The better-than-expected performance was helped by a resilient services sector, because of the Qatar World Cup, which saw decent performances from pubs and bars, as people went out and supported England. Tour operators and reservation services were also positive contributors with gains of 3.7% as people booked holidays for next year. Working on the rather unscientific basis that the World Cup ended on 18th December, and England went out on the 10th there is the prospect that we might have avoided a Q4 contraction and thus avoided the “R” word, even when taking into account the disruptive nature of recent strike action. Recent retail updates have offered encouragement that consumers are still spending, albeit more cautiously. According to the OBR the UK economy is already in recession, however as is often the case, could the OBR be wrong? Whatever the outcome of this week’s GDP numbers it’s likely to be a close-run thing, but with the September decline of -0.8% set to drop out of the rolling 3-month numbers the UK might avoid a technical recession. Whatever the outcome of this week’s numbers the nuance is likely to be lost on a lot of people given how finances are coming under strain. What we do know is that any growth is likely to be pretty anaemic, and 2023 is still likely to be very challenging. BP FY 22 – 07/02 – having seen the record profits Shell made last year, the focus this week now shifts to BP, and the amount of tax the company pays on its profits made here in the UK. Back in August BP set aside an extra $800m in respect of the increase in windfall taxes for this year. In November the oil company recorded $8.15bn of underlying replacement cost profit, along with a pledge to buy back another $2.5bn of shares. While the headline number was impressive in terms of how close it came to matching Q2’s strong performance, the actual profits attributable to shareholders was zero due to an accounting adjustment which pushed the company into a quarterly loss of $2.16bn. This adjustment came from its gas and low carbon energy unit which once again outperformed with profits of $6.24bn, however due to the volatility in forward gas markets and a repricing of forward gas prices, this has turned into a loss of $2.96bn. Its oil production and operations division returned $5.21bn in profits. On top of the Rosneft adjustment earlier at the start of the year that means BP has actually recorded a -$13.29bn loss so far year to date. BP has already set aside an $800m adjustment in this quarter’s numbers in respect of the latest UK windfall tax, pushing the tax take from the North Sea to $2.5bn for this year. BP is also continuing to pay over $1.2bn a year in respect of the Gulf of Mexico oil spill. One...

AUD/USD rallies on increased risk appetite The Australian dollar rallies as the market remains risk-on. The US dollar’s softness may continue to provide tailwinds despite lacklustre domestic data. Australia’s retail sales saw its biggest drop in over two years in December as the economy is feeling the pinch of the tightening. Extended declines in house prices would further erode consumer sentiment. Still, the full impact of last year’s rate hikes is yet to be seen, signs of a noticeable slowdown may prompt traders to pare back their peak rate expectations. A 25 bp hike has been priced in for the upcoming meeting. The pair is heading towards 0.7280 with 0.6880 as the first support. USD/CAD struggles as Canada’s economy shows resilience The Canadian dollar inches higher as its economy may avoid a mild recession. Cooling inflation has so far given the BoC leeway to pause its monetary tightening. As major central banks are entering the later stage of their hike cycle, market participants would shift their focus to the actual economic impact. Both growth and employment in Canada have proven to be resilient despite a rapid climb in borrowing costs. If the prophesied recession never materialises, the growth-sensitive loonie would be in a better position to surf a new wave of risk-taking. November’s low of 1.3230 is a critical floor and 1.3500 an immediate resistance. UK Oil softens on demand uncertainty Brent crude slips as the demand outlook remains muddy. The EU is looking to impose a price cap on Russian oil. However, the cap may have limited effect as the International Energy Agency stated that it does not expect a major disruption. Demand uncertainty seems to be dictating the price dynamics. Despite a pickup in Chinese economic momentum, hopes that China's re-opening would be a game-changer are yet to become reality. Instead, a drop in the country’s imports in January, partially due to the Lunar New Year holidays, has kept traders on their toes. The commodity is still trading in the 75.00-89.00 range. SPX 500 rallies as Fed nods at disinflation The S&P 500 extended gains after the Fed acknowledged that inflation has peaked. The market barely flinched after the latest rate increase, suggesting that investors are now looking beyond the current tightening cycle. Easing price pressure has made ‘disinflation’ the new trendy word on Wall Street, which in conjunction with robust economic fundamentals indicate that a soft landing might be actually achievable. With peak rate expectations now below 5%, improved sentiment may carry equities higher especially if the CPI stays in a downtrend. The index is challenging last August’ high of 4320 and 4000 is the closest support.

After the past week’s central bank bonanza, things will quieten down in the coming days, although not completely, as the Reserve Bank of Australia will keep the rate hike theme running. On the data front, the highlights will be Canada’s employment report and the first look at UK GDP in the final quarter of 2022. US indicators will be sparse, giving the dollar little to go on as it bounces back from the knock it took from the not-so-hawkish Fed meeting.