Fed Hints At Tapering In A Surprise Move To Financial Markets


The Fed has signaled that it will start discussing the unwinding of its accommodative policy in the upcoming meetings. The US dollar bounced but still trades with an offered tone overall.

The trading week was characterized by two main events. It started with Elon Musk talking down Bitcoin on Twitter, and the bearish move that followed turned out to be just the start of a cryptocurrency market carnage.

Ethereum lost over 25% in a few hours on Wednesday, and Bitcoin briefly traded close to $32,000. In other words, Bitcoin lost 50% of its value, down from over $64,000 in just a few weeks. Once again, it proves that it has a long way until becoming a store of value, and some institutional investors must give some explanation as to why directing funds to such speculative assets as the crypto ones.

The second thing that moved markets was the Fed unexpectedly signaling the tapering of its asset purchases. It indicated that they will start talking about or considering tapering in the upcoming sessions. So not in June, but soon. However, the financial market participants typically trade in anticipation of policy turns, and this is the first time the Fed has hinted at one such turn. Hence, we should not be surprised to see some more market players taking some risk off the table, as the US dollar was sold aggressively in the past six weeks or so.

The stock market did not like the Fed’s signal, and the main indices reacted accordingly. The S&P500 traded with an offered tone all week, as did the Dow Jones.

In Europe, the FTSE100 still hovers around the 7,000-point level, down a bit on Wednesday on stronger than expected inflation data in the United Kingdom. The German index is also holding close to its recent highs, with the 15,000 level being pivotal.

Commodities had a mixed week, with oil losing or gaining about 3% in more than two days this week. Still, while above $60, it remains bullish. Gold and silver acted like a store of value, while the cryptocurrency market showed investors how volatile they could be.

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Disclaimer: None of the content in this article should be viewed as investment advice or a recommendation to buy or sell. Past performance/statistics may not necessarily reflect future ...

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