Midweek Market Podcast – December 15

It’s Central Bank week, topped by the FOMC later today and ably supported by the ECB, BOE, SNB and BOJ later in the week. The hot inflation data continues to grab the headlines and could hold central bankers’ feet to the fire in the weeks & months ahead.

The Market Week – December Week 3    

 

A less volatile week as the Omicron news peaks and troughs, and inflation, in all its forms, grabbed the headlines ahead of the event of the month; the FOMC announcement and press conference later today. There is also the ECB, BOE, BoJ and SNB later in the week.

US PPI hit a 9-year high this week at 9.6%, UK CPI hit a 10-year high earlier today at 5.1% and Canadian and EZ CPI are likely to add to the global surge in the breadth and depth of price rises too. Jobs growth continues to share the headlines, with weekly claims dropping to yet another pandemic low at 184,000 last week and 196,000 expected this week.

The vaccine and booster rollout programmes were given a major profile lift as the Omicron variant appears more transmissible but perhaps less deadly, however it will take several weeks before this can be confirmed. Countries closed borders and restrictions were re-imposed as uncertainty (the markets’ biggest enemy) waned somewhat but continues to undermine sentiment.

Volatility cooled somewhat ahead of the Central Banks. In FX the USDIndex held its bid north of 96.00, spiking as high as 96.50, while EURUSD sank under 1.1300 from 1.1350 and struggles to recoup this level.  USDJPY lifted to 113.80 as the safe haven bid faded for the Yen and Cable sank to test 1.3170 before recovering to 1.3250, as political turmoil rumbled on in London.

US stock markets saw new all-time highs on Friday, before a significant reverse to test the 20-day moving averages once again, with the USA100 leading markets lower ahead of the FED today.

The Gold price, having reversed the month’s losses to $1761 lows as the Dollar and yields ease, remains sideways, with the safe haven bid expected to be limited. The 200-day exponential moving average is north of the key $1800 handle.

USOil prices have cooled as the EIA and Inventories undermine recent gains to over $72.00. This week a low at $69.15 was tested with a stronger Dollar, the less rosy global outlook and the hot inflation data. Inventories this week are once again expected to show a drawdown of over 1.8 million barrels.

The yield on the US 10-Year Treasury Note was also less volatile this week ahead of the FOMC announcement, unable to break 1.50%, and remains rangebound between 1.41% and 1.45%.

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Stuart Cowell  

Head Market Analyst

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