Daily Market Bulletin – 12 January 2022

Market Developments

Investors appeared relieved by yesterday's Powell nomination hearing and today's tame inflation figures from China.

Fed Chair said that the bank will end asset purchases in March, raise rates over the course of the year and "at some point perhaps later this year allow the balance sheet to run off." [1]

This was a more reserved approach, compared to what we got out form last week's Fed minutes, which had revealed that "Almost all participants agreed that it would likely be appropriate to initiate balance sheet runoff at some point after the first increase in the target range for the federal funds rate." [2]

China Consumer Price Index (CPI) came in at +1.5% y/y in December, compare to +2.3% y/y in November. Factory Inflation also slowed, as PPI rose 10.3% y/y versus +12.9% y/y prior.

Trade the News: View our Economic Calendar

Markets continue to track the spread of Covid-19 across many countries and the challenges it poses to China's Zero-Covid policy, while Dr Hans Henri P. Kluge, WHO Regional Director for Europe said yesterday that: "At this rate, the Institute for Health Metrics and Evaluation (IHME) forecasts that more than 50% of the population in the Region will be infected with Omicron in the next 6–8 weeks" [3].

The World Bank released its latest forecasts on Wednesday, slashing Global Growth for 2022 to 4.1%, from 4.3% in the June projections. [4]

Main Asia-Pacific stock markets advanced and European futures are also upbeat, while US 10YR Yields retreat.

The US Dollar steadies after Wednesday's Powell-fueled decline and the JPY Basket is soft. Main Commodity Currencies (CAD, AUD, NZD) are upbeat against both.

Instruments Snapshot

EUR/USD is soft above 1.1350, following yesterday's rise from Powell's less-hawkish than expected remarks.

GBP/USD shows indecision, but clinches fresh two-month highs (1.3646).

USD/JPY is supported and capped by 115.50.

USD/CAD extends its two-month lows towards 1.2550.

AUD/USD is upbeat above 0.7200.

NZD/USD also trades with positive undertone, but faces headwinds ahead of 0.6800.

GER30 extends yesterday's gains past 16,000.

US30 presses beyond 36,300, helped by Powell testimony.

USOIL is tepid above $81/barrel.

XAU/USD halts its 3-day advance, breaching 1,810 on the downside.

Economic Calendar Picks (GMT)

Market participants will now focus on US CPI Inflation due at 13:00.

Eurozone Industrial Production is expected at 10:00 and US EIA Oil Stockpiles at 15:30.

See the economic calendar here.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 12 Jan 2022 https://www.banking.senate.gov/hearings/01/04/2022/nomination-hearing

2

Retrieved 12 Jan 2022 https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20211215.pdf

3

Retrieved 12 Jan 2022 https://www.euro.who.int/en/media-centre/sections/statements/2022/statement-update-on-covid-19-omicron-wave-threatening-to-overcome-health-workforce

4

Retrieved 26 May 2022 https://www.worldbank.org/en/news/press-release/2022/01/11/global-recovery-economics-debt-commodity-inequality

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