Market Quick Take - December 17, 2021 Market Quick Take - December 17, 2021 Market Quick Take - December 17, 2021

Market Quick Take - December 17, 2021

Macro 6 minutes to read
Saxo Be Invested
Saxo Strategy Team

Summary:  A vicious direction change once again for global equities yesterday as the US market erased most of its post-FOMC gains yesterday, with the megacap particularly weak on the session. The change of mood boosted US treasuries, gold and the Japanese yen amid broad signs of weak risk sentiment, a jarring development after what seemed a green light for equities again after the market had fretted the hawkish shift from the US Federal Reserve.

What is our trading focus?

Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - what a rollercoaster ride in Nasdaq 100 futures up 4% on the FOMC statement before giving it all up in yesterday’s session with the index back to square from before the FOMC meeting. The interesting thing that has happened in the past week is the increased volatility in mega caps and their correlation to the rest of the equity market suggesting that the underlying volatility is picking up. The 15,770 level is the critical support level to watch today on the downside.

EURUSD – as noted in the USDJPY comment below, the G3 plus CHF were all strong yesterday on the vicious reversal in risk sentiment post-FOMC, with the euro outperforming the US dollar on the day of the ECB meeting (more on that below), which brought much higher inflation forecasts for next year. It is tough to see the euro strongly outperforming the US dollar if we see more deleveraging/weak risk sentiment from here, but the EURUSD supermajor will likely show much lower beta to USD direction than other USD pair. Notably, yesterday’s rally failed to puncture the local range high of 1.1384, the tactical level ahead of the major resistance of 1.1500.

USDJPY and JPY crosses – the G3 currencies (USD, EUR and JPY) and CHF were strong late yesterday on the broad risk-off, with the JPY and CHF gaining the most, particularly versus traditionally pro-cyclical currencies like AUD, CAD and others. Supporting the stronger JPY was a rally in US treasuries at all points along the yield curve despite the crystallization this week of the Powell Fed’s hawkish shift, a remarkable development, as the market is now second-guessing that the Fed will reach its forecast three hikes next year after a long period of predicting far more tightening from the Fed than was ever evident in the forecast. Pairs like AUDJPY may show greater beta to the swings in risk sentiment, but USDJPY also bears watching after its attempt above 114.00 post-FOMC meeting was reversed, possibly setting up a run at the 112.50 downside pivot level if risk sentiment continues to weaken accompanied by lower long US treasury yields in particular.

Crude oil (OILUKFEB22 & OILUSJAN22) dipped overnight to trade roughly unchanged on the week as omicron developments continue to impact the short-term demand outlook. A weaker dollar has been offset by tighter monetary policies potentially softening the 2022 growth outlook further. While Europe is dealing with a worsening energy crisis, milder than normal weather in Asia has led to a less demand for fuel products used in power generation and heating. With the clouded outlook we expect most of the trading ahead of New Year to be driven by short-term technical trading strategies. Support in Brent at $72.50 while the 21-day moving average, last at $75.30, continues to cap the upside.

Gold (XAUUSD) broke resistance around the 200-day moving at $1795 yesterday as the dollar weakened (see above) and treasury yields dropped to pre-FOMC levels. Central bank actions around the world resulted in the biggest dollar retreat since mid-October and being the most dollar and yield sensitive of all commodities these developments supported the breakout. However, with activity winding down ahead of the holiday period we may not see much in terms of follow-through response, with total ETF holdings showing no pickup despite the latest gains. Next level of resistance at $1815 with a break back above $1830 needed to signal renewed upside momentum.

US Treasuries – yields dropped along the entire US yield curve on a remarkable day for US treasuries, just the day after the FOMC meeting made the Fed’s hawkish shift complete with a fresh series of stronger economic, inflation and Fed policy forecasts. It is interesting to note that yields at the front end of the curve have fallen below where the Fed itself is saying it will take them this year after this rally. The US 10-year treasury yield pushed down to a local low near 1.40%. The next focus there could be the spike low of 1.33%, which was posted the day the news of the omicron covid variant broke.

What is going on?

The Bank of England surprises with 15 basis point rate hike – turning expectations on their head once again as few expected the bank to move rates until the first meeting of this year. The BoE members voted 8-1 in favour of the decision, with one dovish dissent. This surprise came after the market was nearly sure of a rate hike in November that didn’t happen. While sterling rallied hard intraday, EURGBP is largely back where it was before the meeting, while GBPUSD rose above 1.3350 before easing back lower. Perhaps it was the recent November core CPI print reaching 4.0% year-on-year, a multi-decade high, that prompted the decision. The Bank predicts that inflation could peak at around 6% in April. The market is pricing high odds of another 25 basis points of tightening at the next meeting in February.

ECB still indicates temporary inflation, vows gentle QE taper after March. The ECB’s PEPP of emergency pandemic QE purchases will roll off in March, but ECB President Lagarde said there would be no “brutal transition” to lower QE as the bank is set to continue purchasing EUR 40 billion/month for three months (versus around EUR 70 billion now), then EUR 30 billion for three more months before reverting to the EUR 20 billion that was in place before the pandemic outbreak. The inflation forecast for next year was raised all the way to 3.2%, a surprise to many, but 2023 and 2024 forecasts were raised much less, with both at 1.8%, suggesting a belief in the transitory narrative. President Lagarde said it was unlikely that the ECB would hike rates in 2022.

FedEx shares up 5% on Q2 blowout earnings. FedEx, one of the world’s largest parcel and logistics companies, reported Q2 adjusted EPS of $4.83 vs est. $4.26 and revenue of $23.5bn vs est. $22.4bn driven by higher prices. The company is continuing to have issues with sourcing employees and wages are still going up. FedEx expects to raise prices further in 2022 to offset rising input costs.

Turkish central bank cuts rates as expected and despite cratering lira but signals end of cutting cycle. The Turkish central bank lowered the policy rate 100 basis points to 14% as expected, even as the lira has lost more than another 10% in the few sessions before the meeting. The central bank committee said that this would be the final cut for now, but signaling from Turkey’s president Erdogan will be more critical from here, as the central bank is under his political sway as he has cast the lira devaluation and fight against the high rates needed to shore up confidence in the lira as a fight against foreign speculative interests and that lower rates are a boon to the economy. Yesterday, Turkey announced a 50% increase in the minimum wage, risking a wage-price spiral.

EU gas and power prices surged to a new record high on Thursday before opening lower today after Gazprom booked some pipeline capacity overnight. Before then, the Dutch TTF gas future (TTFMF2) had closed above €140/MWh or $45/MMBtu, more than 9X the long/term average, while German Power traded more than six times higher than the long-term averaged at €245/MWh. A combination French nuclear power plants temporary shutting down due to faults on pipes, an expected cold snap next week and low flows from Russia continue to reduce already-low inventories. Adding to this US pressure to apply sanctions on Russia over Ukraine and German regulators saying the Nord Stream 2 may not be approved before July.

What are we watching next?

Should the market have been fearing something else besides Fed rate hikes? The narrative heading into the FOMC meeting was often that markets should be fearing the hawkish shift from the Fed and that higher rates could eventually pressure markets. But history shows that merely the reduction of Fed liquidity - i.e., the tapering of QE purchases - could be the factor that is applying the most pressure on the equity market, as US treasury yields actually fell sharply all along the US yield curve yesterday despite the crystallization of the Fed’s hawkish shift at this week’s FOMC meeting, such that forward expectations are now lower for where the Fed funds rate will end next year than the Fed itself is now forecasting.

Russian central bank meeting today - The Russian central bank is expected to hike rates 100 basis points to 8.50% as the bank attempts to stay ahead of rising inflation. In other news in Russia, Germany said it would be unable to make a decision on gas flowing through the Nord Stream 2 pipeline from Russia until July.

Earnings Watch – no earnings today and the earnings calendar is empty for next week and will stay light until the Q4 earnings season starts in mid-January.

Economic calendar highlights for today (times GMT)

0900 – Germany Dec. IFO Survey

1030 – Russia Central Bank Rate announcement

1330 – Canada Nov. Teranet/National Bank Home Price Index

1800 – US Fed’s Waller (FOMC voter) to discuss US economic outlook


Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app:

Apple Sportify Soundcloud Stitcher


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (
Full disclaimer (

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.