Inflation now considered “anchored” and no longer “transitory”
With inflation now seen as “anchored” and no longer “transient”, the Fed will likely raise rates before reaching maximum jobs. The Fed is now on track to complete its purchasing cutback by March 2022 and potentially raise rates three times in 2022.
Asian markets:
- Australian ASX 200 futures are up 22 points (0.3%), the spot market is currently valued at 7,451.30.
- Japanese Nikkei 225 futures are up 360 points (1.26%), the spot market is currently expected to open at 28,815.60
- Hong Kong Hang Seng futures are down -62 points (-0.26%), the spot market is currently valued at 23,892.91.
- China’s A50 index futures are up 184 points (1.16%), the spot market is currently valued at 16,153.88.
Close of markets in the United States :
- The Dow Jones Industrial gained 383.25 points (1.08%) to close at 35,927.43
- The S&P 500 Index gained 95.08 points (2.08%) to close at 4,686.75
- The Nasdaq 100 index gained 479.503 points (2.35%) to close at 16,325.66
US stocks erased earlier losses to close broadly higher, after Jerome Powell convinced markets the economy remained strong and had the tools to fight inflation. The Nasdaq 100 was the best performer and rose 2.4%, compared to 2.0% for the S&P 500 and around 1% for the Dow Jones.
At the December 2021 FOMC meeting
- The Fed has kept its interest rates in the target range of 0 to 0.25%
- Increased their rate of reduction from $ 15 billion to $ 30 billion per month
- This puts the Fed on track to complete the cut by March
- The graphic dot plot shows the potential of three rate hikes in 2022
Jerome Powell : “The reality is that we do not yet have a strong participation in the labor market and may not have one for a while; inflation is way above target and we need to develop policy now ”.
The Fed has stepped up the pace of the cut, which, at $ 30 billion a month, now has them on track to be completed by March. And the dot chart suggests we could have 3 hikes in 2022. But the most interesting takeaway from today’s meeting is that the Fed seems to have given up on waiting for maximum employment to be reached before increase rates. At the end of the day, they are above target on inflation and well behind their tenure. And with inflation now seen as “anchored” and no longer “transient,” the Fed will likely raise rates before reaching maximum jobs.
Understandably, Powell took his hat off to concerns about Omicron at the press conference, although his comment that “people learn to live with variants” suggests that this is more of a formality than a formality. real concern. The Fed is therefore clearly focusing on controlling inflation, which is no longer considered transitory, but well established.
So was the Fed hawkish or not?
The act of shrinking and shifting to a faster “take off” is of course hawkish, although it was primarily intended to some extent. Yet, as usual, the press conference was used to tame any hawkish expectation. This basically saw a game of two halves; yields and the US dollar rallied on the monetary policy announcement, then gave up early gains at the press conference. The US Dollar Index (DXY) and the US 2-Year Yield both hammered bearish at their highs, allowing AUD / USD and NZD / USD to rebound further. on their lows and forming bullish engulfing candles. The Australian dollar (AUD) was the strongest major currency yesterday in the forex.
Employment in Australia
Over time, it will be interesting to see if the RBA becomes reluctantly, even vaguely hawkish, now that the Fed is upping its own game. Although a good first step would be a Decent Jobs Report today.
We can see that the AUD / USD pair had a decent session yesterday and its recent 4 hour candle is close to closing above trend resistance. The pair AUD/USD managed to build a base around the weekly pivot point and the failed peak below 0.7100 suggests that a corrective lower has formed. From there we look for a break above the 0.7187 high and an initial move to 0.7250 near the weekly R1 pivot point and monthly pivot point.
ASX 200 Market
ASX 200: 7327.1 (-0.70%), December 15, 2021
- Utilities (0.31%) was the strongest sector and information technology (-2.62%) was the weakest
- 10 of the 11 closed areas below
- 6 out of 11 sectors outperformed the index
- 40 (20.00%) shares rose, 150 (75.00%) shares fell
- 56% of stocks closed above their 200-day moving average
- 44.5% of stocks closed above their 50-day moving average
- 46.5% of stocks closed above their 20-day moving average
Outperformers:
+ 4,05% – Virgin Money UK PLC (VUK.AX)
+ 3,88% – Alumina Ltd (AWC.AX)
+ 2,58% – Whitehaven Coal Ltd (WHC.AX)
Underachievers:
-7,58% – Pointsbet Holdings Ltd (PBH.AX)
-7.32% – Polynovo SA (PNV.AX)
-7,25% – Hub24 Ltd (HUB.AX)
By Matt Simpson, Forex.com » Official site
Disclaimer: The information and opinions contained in this report are provided for general information only and do not constitute an offer or a solicitation to buy or sell forex foreign exchange contracts or CFDs. Although the information contained in this document has been taken from sources believed to be reliable, the author does not guarantee its accuracy or completeness, and assumes no responsibility for any direct, indirect or consequential damages that may result from the fact that someone relies on such information.
