Senior Relationship Manager
Summary: Seesawing ahead of the FOMC
Good Morning
Markets are seesawing ahead of the central bank decisions, here are the probabilities as of right now:
Fed: +0.75% with 81% Probability, 1% with 19% probability
SNB: +0.75% with 53% Probability, 1% with 46% probability
BoE: +0.5% with 69% Probability, 0.75% with 31% probability
Initially risk came under pressure yesterday but could recover through late trading and overnight.
The GER40 fell to 12600 before rising 300 points to 12900, all three US Indexes gain around 0.7% and all eyes are on the FOMC. Outlier was the healthcare sector, that fell a little lower on president Biden`s declaration that the Corona epidemic was over.
Along overall sentiment, the USD gave up ground and the USD Index fell to 109.60. EURUSD is back above parity, GBPUSD rose to 1.1434, USDJPY remains at 143.35. Gold gained to 1672 and Silver 19.45.
China left rates unchanged as expected.
The Japanese CPI remains high at 2.8% and is seen to rise to 3% in October but there is no action expected from the Bank of Japan. The BoJ set`s rates in the night from Wednesday to Thursday but no change is expected with 97.6% probability.
In the US , confidence of Home Builders fell again and remains “Poor” at below 50. Cause are the Mortgage rates, that continue to rise: . The 30-year fixed mortgage rate was above 6% last week for the first time since 2008.
Bitcoin felt to 18283 yesterday before recovering to 19400, ETH traded as low as 1281 before rising to 1365
The Market will be dominated by the FOMC and any possible comments from central bankers. The Germans PPI Canadian CPI or US Building permits would have to come as a real surprise to move markets. 0.75% or 1% by the FOMC is the forefront of traders’ minds, Investors are not likely to enter the market before Thursday when the picture is a little less muddy.
Expiries
Physically Settled Futures:
Light Sweet Crude Oil (WTI) - Oct 2022 (CLV2) will expire 20th Sep 15:00 GMT
Platinum - Oct 2022 (PLV2) will expire 22nd Sep 15:00 GMT
Expiring CFDs:
PLATINUMOCT22 will expire 21st Sep 15:00 GMT
Bond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach