Paul Gallacher
City Trading & Investment
Market Commentary
Markets are recovering from last night’s FOMC statement and Janet Yellen’s press conference. Essentially, the Fed left the language in their communique unchanged, thus prolonging the status quo as the central bank nears the end of it’s accom-modation cycle. While asset purchases are due to come to an end in the latter part of October, the FOMC is still intent on reiterating that interest rates will remain low for a considerable time period after QE termination.
While equities reacted in a more straightforward fashion, the response to FOMC has not been uniform across a range of assets. Yields on US government bonds edged higher mildly, Eurodollar-implied rates for Dec 2016 expiry shifted higher from 208.50 bp to 228.0 bp since FOMC, and USD strength-ened.
ECB conducted its first disbursement of TLTRO funds this morning, allotting EUR 82.6 bn vs. expectations of EUR 135.0 bn. The operation prompted a muted response in the markets, with lesser than expected allotment reported to be a function of constraints imposed by stress tests conducted for EU banks.
The main event for the latter part of the week will be Scot-land’s vote on independence, with results expected on Friday morning.
Intraday Strategy: E-mini S&P
The E-mini S&P erased all of the downside sustained since the August Nonfarm Payrolls data on the 5th September: initially fol-lowing the news of a CNY 500 bn liquidity support from the PBoC and a further extension followed last night as the FOMC kept their stance at status quo. E-mini set a new high for the year, albeit briefly last night and is consolidating within the vicinity of yester-day’s lofty levels currently.
Our strategy for the day ahead entails buying into a pullback to the pivot, targeting a re-test of the highs of the year and a potential ex-tension to R2.
Intraday Strategy: EUR/USD
The EUR/USD finally broke out of its range (which has been in place since the beginning of the month) in the latter part of yester-day’s session. The main catalyst for the sudden bout of volatility came in the shape of USD strength post-FOMC.
Our strategy for the day ahead entails selling into a pullback to R1, targeting a fade to the pivot and a potential further extension to the lows of yesterday’s session.
Technical Analysis: Nasdaq and DJIA
Nasdaq and DJIA retracing the majority of recent losses since the start of the month, albeit to a lesser extent than the S&P 500.
Technical Analysis: Bund and US 10-year T-note Futures
10-year German and US yields pushed marginally higher following the FOMC last night.
Technical Analysis: GBP/USD and USD/JPY
Sterling has been strengthening this morning following the latest poll release which suggested a tilt towards the “NO” vote. USD strength against JPY not showing signs of abatement following yesterday’s rally.
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