FXTM information and reviews
OctaFX information and reviews
XM information and reviews
FXCC information and reviews
FxPro information and reviews
HFM information and reviews

A hawkish Fed but the market expected more

16 December 2021 Written by Chris Weston  Pepperstone Head of Research Chris Weston

The dust has now settled on the FOMC meeting and participants have had the chance to assess the dots and the economic projections of Powell’s statement. The question I ask is if you knew the full outcome in advance could you have genuinely made money from it? I'm not convinced I would have. Yesterday traders were assessing the possibility of a June rate hike (from the Fed) and we’re now debating whether the Fed start hiking in March, a fate the market puts a 50% probability on – if the S&P 500 and NAS100 don’t drawdown significantly and the wage and inflation data rolls in hot then the March meeting is live.

Three hikes pencilled for 2022 (in the dots) from the Fed was not expected and they justify this by a 2.7% call on core PCE. Jay Powell was certainly upbeat and perhaps the market was inspired by his views - they seem to have created a solid bid in risk assets with the NAS100 +2.4%, while we saw a broad sell-off in the USD, a monster reversal lower in US real rates and XAUUSD into 1784

Again, if you’d told me the outcome, I’d probably have taken the other side of these moves. The question is whether that positive flow continues in the session ahead – recall, we have the ECB, Norges and BoE meeting in our sights today. However, to me, those are largely idiosyncratic events and confined to select markets. The Fed are the markets price maker and affect everything.

So, with calmer heads and a renewed mindset, I question if today could herald a different vision on the Fed decision. The market has had time to digest everything we’ve heard and it would really not be surprising to see a reversal of this positivity – again, it pays to have an open mind and follow the flow. I’d be certainly looking at the USD, 2 and 5-year Treasuries and Apple – they may be some of the core instruments to focus on in the near term.

We also have options expiry on Friday and this may see the S&P 500 shackled to the 4700 area, but things will be free to move around next week and that could mean greater volatility in equities that may spill over into other markets. If the data continues to roll in hot can the markets absorb an end to the QE program let alone a rate hiking cycle?


Share: Tweet this or Share on Facebook


USD & Yields higher, Yen, Stocks & Gold sink
USD & Yields higher, Yen, Stocks & Gold sink

A blockbuster NFP on Friday (571k new jobs vs 185k) & strong Services PMI (55.2 vs 50.5) has lifted the Dollar and Yields, sinking Stocks and Gold (the 3 mth Gold rally is over)...

7 Feb 2023

Gold traders appear hesitant
Gold traders appear hesitant

Gold finally broke out of the consolidation after being range bound for nearly 11 days. The correction to the downside was expected as gold traded in the overbought territory...

3 Feb 2023

Do safe haven currencies still exist?
Do safe haven currencies still exist?

At the end of last year, Swiss National Bank (SNB) President Thomas Jordan told news media that both the Swiss franc and the US dollar could be considered safe havens...

3 Feb 2023

USD Index appears bid and approaches 102.00 ahead of Payrolls
USD Index appears bid and approaches 102.00 ahead of Payrolls

The index looks to extend the post-ECB rebound. January Nonfarm Payrolls will take centre stage later. Other key data includes the ISM Non-Manufacturing...

3 Feb 2023

USD Index appears depressed post-Fed, breaches 101.00
USD Index appears depressed post-Fed, breaches 101.00

The index drops to 10-month lows near 100.80. The dollar remains on the defensive post-FOMC event. Initial Claims, Factory Orders next of note in the docket...

2 Feb 2023

Can The GER40 Keep Its Strength?
Can The GER40 Keep Its Strength?

As attention turns to the approaching Fed and ECB announcements, the GER40 index maintains stability near its best level since September last year...

2 Feb 2023

Editors' Picks

FXCM information and reviews
ActivTrades information and reviews
RoboForex information and reviews
MultiBank Group information and reviews
MultiBank Group
Libertex information and reviews
Vantage information and reviews

© 2006-2023 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.