The US central bank decided to speed up the tapering of its asset purchase program (QE), bringing QE's expected conclusion forward, to the first quarter of 2022.
More to it, all bank official's now see interest rates higher in the next year, from current 0-0.25%, with the median projection standing at 0.9% - indicating three hikes in 2022.
This marks an aggressive upgrade from the previous forecasts in September, when only half of them (9 vs 9), saw rates higher and the median then being 0.3%.
Stock markets however were not spooked by the Fed's hawkish pivot, as the event did not produce anything outside the realm of expectations.
US30 closed Wednesday higher and today it extends its gains. So do the broader SPX500 and the rate-sensitive NAS100. In fact, big-tech had a blast, with Amazon (AMZN.us), Apple (AAPL.us) and Facebook-Meta (FB.us) for instance, posting gains of more than 2%.
The banking sector did not fare that well though, with JPM losing around 1% and the US Banks Basket also closing the day lower. Higher rates environment is generally seen as good for banks, but the Fed's tightening path has flattened the yield curve, as median interest rate projections stayed at 2.5% for the longer run.
Back to the US30, after a shallow correction it extends gains today and retakes 36,000, which brings November's record highs (36,570) in its crosshairs. From a purely technical prospective the move looks overextended and that could create downward pressure. The downside however have many areas that can contain bears, with the first key one located at 35,520-387.
We will need to see if the good mood will carry on when NA traders reenter the market, but above EMA200, bulls are in the driver's seat.
Past Performance: Past Performance is not an indicator of future results.
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.