Daily Market Bulletin – 16 December 2021

Market Developments

Yesterday, the US Federal Reserve doubled the pace of its QE tapering to 30 billion for January, in light of inflation developments and the further improvement in the labor market. Based on this, the asset purchase program is expected to conclude in Q1 2022.

Interest rates were maintained at 0-0.25%, but all officials now see them higher in 2022 and the median projection points to three hikes next year.

On the topic of inflation, the central bank dropped the word "transitory" from the policy statement, in line with Mr Powell's late-November comments.

When asked as to how long the bank would wait after QE end to raise rates, Mr Powell said that members haven't taken a position on that, but does not foresee that there would be a very extended wait. [1]

The event spurred volatility, with the US Dollar closing Wednesday lower and Wall Street higher, as the event did not produce anything unexpected.

On the Omicron front, White House chief medical advisor Dr. Anthony Fauci warned that the new variant "compromises the effects of a two-dose mRNA vaccine-induced antibodies", but that the booster shots work against it. [2]

Australia released a stellar Employment report earlier, with the addition of 366.1K jobs in November, while Unemployment dropped to 4.6% (from 5.2% prior).

RBA Governor Lowe however, (again) pushed against rate hikes in 2022, saying that "the condition for an increase in the cash rate will not be met next year". [3]

Main- Asia-Pacific stock markets were mixed, as they digested Fed and Omicron news, but European futures rise, whereas US 10YR yields are soft.

The US Dollar is mixed after yesterday's decline and main Commodity Currencies (AUD, NZD, CAD) are pressured against the greenback.

Instruments Snapshot

EUR/USD finds renewed vitality as we head towards the European open, trying again to surpass 1.1300.

GBP/USD is mixed above 1.3250, struggling to build on Wednesday's rise.

USD/JPY enters its fourth profitable day and trades above 114.00, helped by the Fed's hawkishness.

USD/CAD extends losses and threatens 1.2800, despite yesterday's 3-month high (1.2939).

AUD/USD shows indecision above 0.7150, amidst stellar jobs report and dovish RBA.

NZD/USD trades two-ways, as it defended 0.6750 earlier and now covers its losses.

GER30 advances past 15,700.

US30 advances and probes 36,100

USOIL trades with positive undertone, eyeing 72.00.

XAU/USD is upbeat and probes 1,785.

Economic Calendar Picks (GMT)

Central Banks continue to dominate the economic calendar, as those of England, Europe and Switzerland hand down their monetary policy decision.

Market participants were heading into the Bank of England announcement with low expectations, after last month's disappointment and Omicron news, but yesterday's surge in UK Inflation may complicate things. Apart for the rate decision, vote count and overall rhetoric will draw attention.

The European Central Bank (ECB) is not expected to change rates, but participants will be looking into any updates in regards to the asset purchase programs, the new economic projections and Ms Lagarde's press conference.

Other than that, a series of PMIs and US Industrial Production stand out.

Overnight, the Bank of Japan (BoJ) takes up the baton for its European counterparts (03:00).

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 16 Dec 2021 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20211215.htm

2

Retrieved 16 Dec 2021 https://www.whitehouse.gov/briefing-room/press-briefings/2021/12/15/press-briefing-by-white-house-covid-19-response-team-and-public-health-officials-73/

3

Retrieved 25 Jun 2022 https://www.rba.gov.au/speeches/2021/sp-gov-2021-12-16.html

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