All you need to know before the Fed decision [Video]

Ipek Ozkardeskaya Swissquote Bank Ltd

Yesterday’s US producer price index came as a slap in the market’s face, as the latest data showed that goods costed close to 10% more at the factory gate in November, a terribly high number for the US that the Federal Reserve (Fed) must deal with ASAP.

Investors’ eyes popped out of their heads when they saw the 9.6% PPI figure, and the hawkish expectations topped sending Nasdaq more than 2% lower during the session. The technology-heavy index still recovered to the close, but ended the session more than 1% lower. The S&P500 slid 0.75% and the Dow dropped some 0.30%.

The kneejerk reaction to the US PPI data is reasonable, but it may be more fear than harm when it comes to how strong the Fed will react to it. Walking in today’s decision, we already know that the most important take of this year’s last FOMC meeting is inflation being no more ‘transitory’. We already know that the Fed is preparing to announce a faster QE taper, and to hint at perhaps sooner and faster rate hikes to cool down the inflationary pressures. And that’s already mostly priced in.

But the possibility of a hawkish surprise from the Fed keeps appetite in Bitcoin limited, while Dogecoin rallies after Elon Musk’s tweet suggesting that Tesla will sell merch in exchange of Dogecoin.

Elsewhere, Harley Davidson is going green but the conviction seems to be low for its electric motorcycles for now.

Author

Ipek Ozkardeskaya

Swissquote Bank Ltd

Ipek Ozkardeskaya began her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked in HSBC Private Bank in Geneva in relation to high and ultra-high-net-worth clients.

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