Fed’s dovish taper, BoE’s dovish hike?
November 04,2021 07:32:35Overnight Headlines
*US stocks closed at all-time highs…again
*USD moved lower initially but is back above 94
*No surprises from patient Fed who trimmed bond buying by $15bn per month
*Oil prices extend decline after Iran sets date for nuclear talks
*US ISM non-manufacturing surged to a record level, ADP saw a big beat
US equities enjoyed the message from the Fed. Indices finished near their best levels with small caps (Russell 2000) again very strong +1.8%. There were no clear sectors or styles. The Vix ticked down close to 15, a one-year low. Asian markets are positive this morning even as increasing Chinese Covid cases threaten an already slowing economy. US futures are holding steady.
USD fell after the Fed announcement as more dovish talk disappointed those wanting rate hike signals. But the Fed did what was expected and USD is making back the losses. EUR again struggled above 1.16. GBP is capped by the 50-day SMA at 1.3705 ahead of the BoE meeting. USD/JPY printed a doji meaning some indecision, though is trading above 114.
Market Thoughts – No surprises from the Fed
The Fed engineered an orderly start to unwinding its massive stimulus programme. For what it’s worth, the amount of QE since the start of the pandemic totals $4.4trn. Chair Powell sprang few surprises and introduced some flexibility by saying that the tapering pace could be adjusted if needed. Most see the balance of risks to a faster pace with core inflation potentially above 5% next year. Currently, tapering is not tightening as the Fed’s balance sheet is set to expand next year.
With the meeting out the way, economic data will now be key with NFP up tomorrow. The recent dollar correction was at least partly down to other central banks becoming slightly more hawkish. But persistent US inflation may force the Fed’s hand going forward. The markets currently price a policy rate of 1.45% in three years, below the 1.80% median Dot Plot. Both of these are likely to be revised higher with persistent price pressures. This means an underlying bid for the dollar.
Chart of the Day – GBP/USD awaiting BoE
It’s slightly better than a coin toss chance that the BoE raise rates this year. Economists are divided too as the MPC battle with the familiar transitory question. Around four rate hikes are priced in for next year and the bank is expected to push back against this. This might be done by a downgrade of their inflation forecasts. The vote split will also be telling. It seems it will be harder to convince more doves for a series of hikes.
GBP has held above the key 1.36 level this week. A clear break down through this support sets us up for a test of the September low at 1.3411. If the BoE fail to push back convincingly against the current market pricing, we could climb up close to the 1.38 zone. Buyers then face trendline resistance and the 100-day SMA at 1.3763 and the 200-day SMA above.
Jamie DuttaAnalyst / Trader
"With extensive experience as a full time trader and financial market commentator, I have worked as a trader in top tier investment banks and trading houses, including Morgan Stanley and GAIN Capital trading Forex, Index derivatives. and Bonds. I combine technical analysis with a deep fundamental knowledge to identify trade set-ups. My real life experience allows me to break down the complexities of financial jargon and trading. This means everyone can better understand the compelling forces of greed and fear which are realised every day in countless ways across markets."
Vantage does not represent or warrant that the material provided here is accurate, current, or complete, and therefore should not be relied upon as such. The information provided here, whether from a third party or not, is not to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any financial instruments; or to participate in any specific trading strategy. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. We advise any readers of this content to seek their own advice. Without the approval of Vantage, reproduction or redistribution of this information is not permitted.
Pembukaan akun cepat & mudah
-
Daftar
Pilih tipe akun dan kirimkan aplikasi Anda
-
Danai
Danai akun Anda menggunakan metode pendanaan yang bervariasi
-
Trade
Akses 400+ instrumen CFD di semua kelas aset melalui MT4/MT5
Hanya itu. Sangat mudah untuk membuka akun trading Forex dan CFD.
Selamat datang ke dunia trading!
BUKA AKUN LIVE
Vantage is a global, multi-asset broker offering clients access to a nimble and powerful service for trading CFDs on Forex, Commodities, Indices, Shares.
With more than 10 years of market experience and headquartered in Sydney, Vantage now has over 1,000 staff across more than 30 global offices.
Vantage is more than a broker. It provides a trusted trading ecosystem that enables clients to achieve their own success, in a faster and simpler manner.
Be empowered to better capitalise on winning market opportunities when you trade smarter @vantage.
