The top chart shows the weekly FXCM FAANG basket, with the real rate beneath. The bottom shows the correlation coefficient (cc) between the two, registering as -87%. The cc has maintained a negative relationship for 2022 (green-shaded horizontal).
The latest inflation data does suggest a moderation in its sticky elements. Also, the latest Fed minutes indicate rate increases at a decreasing rate, i.e. 50bps for Dec as opposed to the previous policy of 75bps.
If the real rates start reflecting dovishness or a softer terminal rate, and given the inverse cc, the FXCM FAANG basket may be a beneficiary. This is because the FAANGs are sensitive to interest rate changes. As such, we continue to monitor.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.