Market update: Taper gets a boost and transitory gets “retired”


Powell “retires” Transitory in light of Omicron & surprisingly suggests faster taper – Stocks tank, Dollar & yields rise on faster tightening expectations.

  • USD (USDIndex 95.90) back down from leap to 96.60 on Powell testimony. Saw fresh wave of risk aversion as Treasuries sold off, yields spiked (particularly the 2yr), Stocks fell significantly with USA100 down over -2.4% (APPL bucked the trend +3.16%) USA500 -1.90% (-88pts) 4567 & USA30 off 652 pts or -1.86%. Consumer confidence saw a slump in the headline, and a rise to a 13-year high in the inflation component. The Chicago PMI fell to 61.8. Home prices increased to fresh record peaks.

  • US Yields 10-year rates were down over 7 bps to 1.41% before closing at 1.443% before recovring to 1.468% now.  

  • Asian Markets – Equities – Topix and Nikkei are currently up 0.4%, the Hang Seng bounced 1.1% and the CSI 300 is up 0.1%. The ASX, which outperformed yesterday, dropped back -0.3%. Data over night – Japan’s manufacturing PMI came in stronger than expected and while China’s private PMI reading signalled stagnation at 49.9, that was compensated somewhat by the stronger than expected official manufacturing PMI released yesterday. AUD GDP was not as bad as expected -1.9% vs -2.7% & 0.7% last time.

  • USOil – continues under pressure, down to $64.08 (14-week lows) yesterday – recovered to test $68.00 today – expectations continue to grow that OPEC+, will put on hold plans to add 400,000 barrels per day (bpd) of supply in January at their meeting tomorrow.

  • Gold finally some intra-day volatility – Powell surprise spiked to $1808 – before testing $1770 with a couple of hours, back to $1788 now. 

  • FX markets – Yen rallied USDJPY dipped to 112.50, back to 113.40 now, EURUSD now 1.1326 & Cable steadied to 1.3300-1.3330.

European Open – December 10-yr Bund future down -11 ticks at 172.26, slightly outperforming versus Treasury futures. Central bankers may be getting more nervous about inflation outlook, but Omicron clearly is clouding over growth outlook & in Europe at least that will boost the arguments of the cautious camp at the central banks. US yields remain firmly below the levels seen before the new virus variant hit the headlines & sentiment is likely to remain jittery, even if stocks are set to back up from yesterday’s lows, with DAX & FTSE 100 future posting gains of 0.9% and 0.7% respectively & a 1.4% jump in the NASDAQ leading US futures higher. Data releases today kicked off with a big miss for German Retail sales (-0.3% vs 1.0%), higher UK house prices & firmer CPI from CHF.

Today PMIs (EZ & UK),US Markit Final Manufacturing PMIs, US ADP and ISM Manufacturing PMI, JTC and OPEC meetings, BoE’s Bailey and Fed’s Powell & Yellen testify.

NZDJPY

Biggest FX Mover @ (07:30 GMT) NZDJPY (+0.60%) Risk-sensitive currencies remain volatile, from a slide to 76.65 yesterday, today a rally to 77.80. Currently MAs aligned higher, MACD signal line & histogram over 0 and rising, RSI dipping from 70.00 at 58, Stochastic remain OB. H1 ATR 0.172, Daily 0.84.

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Feed news

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD falls below 1.1300 as dollar keeps its strength ahead of Fed

EUR/USD is trading in the negative territory below 1.1300 on Wednesday as markets wait for the FOMC to announce its policy decisions following its two-day meeting. The US Dollar Index holds above 96.00 ahead of the American session, supported by the modest recovery seen in US Treasury bond yields. 

EUR/USD News

GBP/USD holds above 1.3500 for now on improving sentiment

GBP/USD is posting modest daily gains above 1.3500, supported by the positive shift seen in market sentiment. The UK's FTSE 100 Index is rising more than 1.5% and S&P Futures are up 2.4% ahead of the Fed's policy announcements. 

GBP/USD News

Gold on the defensive below $1,850, focus remains on FOMC

A combination of factors dragged gold away from over two-month high touched on Tuesday. A recovery in the risk sentiment, Fed rate hike bets acted as a headwind for the commodity.

Gold News

XRP presents buying opportunity before breakout to $1

XRP continues to test a new support zone in the $0.60 value area. Bottom likely in for XRP, relief rally, or trend change incoming. The Point and Figure chart shows a bullish entry opportunity.

Read more

Bank of Canada Rate Decision Preview: No surprises for a 25bps rate hike Premium

BOC to keep the overnight rate steady at 0.25% at its first policy meeting of 2022. A surprise 25-bps rate hike cannot be ruled out amid hotter Canadian inflation, labor market. 

Read more

Majors

Cryptocurrencies

Signatures