Market Update – December 15 – FOMC Day – A Hawkish FOMC priced in?

USD (USDIndex 96.39) holds onto gains, close to 2-wk high.  Stocks closed lower (Nasdaq worst performer again  -1.14%) & Yields drop. US PPI climbed to 9.6% from 8.8%, new ATH. Major FX pairs sideways into FED. US Senate agrees gov. funding into February. Asian markets largely weaker. Omicron news mixed – Pfizer pill 90% effective in final trails, Sinovax & the 3 US vaccines – ineffective after 2 doses vs Omicron – US study, Omicron spreading at “unprecedented rate” – WHO.
US Yields 10yr traded down to 1.416% up to 1.438% now.
EquitiesUSA500 -34.88 (-0.75%) at 4634 – USA500.F trades flat at 4633. MFST -3.26%. Musk could have off-loaded $18m. worth of #TSLA (-0.82%) stock by year end – CNBC.
USOil – under $70.00 – EIA unsure about Omicron impact on fuel demand – trades at $69.40 testing 8-day lows. 
Gold spiked under key $1770, sank to $1766.70, earlier – now struggles at $1769.
FX marketsEURUSD 1.1275, USDJPY 113.70, Cable recovers from breach of  1.3200 to trade at 1.3245 now. (98 Tory MP’s voted against PM Johnson’s plans for further restrictions, motion was passed with opposition support).

Overnight CNY – mixed data Factory output speeds up but Retail Sales miss (3.9% vs 4.9%),  GBP CPI jumps to 5.1% (10-yr high) vs 4.8% vs 4.2% last time – CORE leaps to 4.0% from 3.4%. RPI (which only looks at consumption up to 7.1%) – factory gate prices are up 9.1% & input costs up 14.3% on a year ago – even more grist to the mill for BOE hawks.  

European Open – The March 10-year Bund future is down -3 ticks, while the 30-year year has moved higher overnight. U.S. futures are also posting fractional gains. A mixed and cautious picture then as markets wait for the FOMC announcement, which is expected to confirm a faster tapering schedule, despite latest virus developments. The DAX future is up 0.17% the FTSE 100 is down -1.6%, as the BoE starts its meeting.

Central banks will have a difficult task trying to balance inflation concerns & virus nerves though the FOMC it seems remains on course to speed up tapering. ECB still looks dovish by comparison, even if it is set to confirm the timely end of PEPP on Thursday, which is keeping a lid on EUR. BOE is also expected to push back the flagged rate hike into 2022 as virus restrictions tighten.

Today – Canadian CPI, US NY Fed Manufacturing, Retail Sales, DoEs, FOMC policy announcement and Fed Chair Powell press conference

Biggest FX Mover @ (07:30 GMT) AUDCHF (+0.36%) rallied from 6-day low yesterday at 0.6538 to 0.6585 now. Currently MAs aligned higher, MACD signal line & histogram moving higher & have breached 0 line, RSI 60.95 & rising.  H1 ATR 0.0008, Daily 0.0072.

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Stuart Cowell

Head Market Analyst

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