E Taper Tantrum Averted

US equities traded a tad lower Wednesday, S&P down 0.1%. US10Y yields lifted 2bps to 1.49%, US2yr yields up 2bps, to 0.26% after a hawkish lean on Fed commentary from Raphael Bostic. Bostic, a vote suggested that a tapering decision could be forthcoming in "3-4 months". Keeping in mind Bostic has been leaning hawkishly recently - indicating earlier this week that he expected rate liftoff in late 2022 - so this timing suggests a consensus Fed view might be coalescing around the December meeting with several Wall Street banks circling their calendar for Holiday Taper.

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US equity futures are flattish as S&P is bumping up against recent resistance at 4,240-50 and generally struggling for consistency after last week's FOMC meeting.

 A Fed that communicates its message as a dovish taper should benefit commodities, value equities, and hurt USD. However, a more uncertain monetary policy backdrop will not allow these strategies to reassert themselves quickly. 

Meanwhile, G10 and EM outlooks are diverging. For example, an upbeat BoE could drive GBPUSD higher today. By contrast, China – the anchor for Asia and Global EM FX- is looking for widening credit spreads, an increasingly hostile credit impulse, and FX policy balancing exports vs input costs.

Gold lost some traction before reaching $1800 overnight and erased a portion of its daily gains. Following mixed data (A beat on US manufacturing, a miss on services), the USD gained some strength, creating the primary headwind for bullion.

Not unexpectedly, Oil has run into some profit-taking. The prospect of a more rapid easing of OPEC+ production cuts may be a hit to sentiment in the near term, but considering the reason to add more barrels is strong demand, Oil could remain bid on dips.

Disclaimer: The information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; ...

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