Inflation is now considered “anchored” and is no longer “transitory”
Now that inflation is considered “anchored” and no longer “transitory,” the Fed is likely to raise rates before it peaks in jobs. The Fed is now on track to complete its purchasing cut by March 2022 and potentially raise rates threefold in 2022.
- 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 A50 index futures are up 184 points (1.16%), the spot market is currently valued at 16,153.88.
Closing 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 previous losses to close broadly higher, after Jerome Powell convinced markets that the economy remained strong and had the tools to fight inflation. The Nasdaq 100 was the best performer, rising 2.4%, compared to 2.0% for the S&P 500 and about 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 its reduction rate from $ 15 billion to $ 30 billion per month
- This puts the Fed on track to complete the cut in March.
- The dot plot chart shows the potential for three rate hikes in 2022
Jerome Powell: “The reality is that we still don’t have a strong share of the job market, and maybe not for a while; inflation is well above the target and we need to develop the policy now ”.
The Fed has accelerated the pace of the cut, which, at $ 30 billion a month, now has them on track for completion in March. And the dotted chart suggests that we could have 3 hikes in 2022. But the most interesting conclusion from today’s meeting is that the Fed appears to have given up waiting for maximum employment to be reached before raising rates. At the end of the day, they are above the inflation target and far behind their term. And with inflation now viewed as “anchored” and no longer “transitory,” the Fed is likely to raise rates before it peaks in jobs.
Powell understandably dipped his hat to concerns about Omicron at the press conference, although his comment that “people learn to live with variants” suggests this is more of a formality than a formality, a real concern. Therefore, the Fed is clearly focusing on controlling inflation, which is no longer considered transitory, but is well established.
So was the Fed tough or not?
The act of shrinking and shifting to a faster “take off” is, of course, aggressive, although to a certain extent it was primarily intended. However, as usual, the press conference was used to subdue any aggressive expectations. This basically saw a game of two halves; yields and the US dollar rallied after the monetary policy announcement and then gave up early gains at the press conference. The US Dollar Index (DXY) and US 2-Year Yield beat bearish at their highs, allowing AUD / USD and NZD / USD to further bounce off their lows and form bullish engulfing candles. The Australian dollar (AUD) was the strongest major currency in the forex market yesterday.
Employment in Australia
Over time, it will be interesting to see if the RBA becomes reluctantly, even vaguely aggressive, now that the Fed is upping its own game. Although a good first step would be a Decent Employment 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 low has formed. From there, we look for a breakout above the 0.7187 high and an initial move to 0.7250 near the weekly R1 pivot point and the monthly pivot point.
ASX 200 Market
ASX 200: 7327.1 (-0.70%), Dec 15, 2021
- Public services (0.31%) was the strongest sector and information technology (-2.62%) was the weakest
- 10 of the 11 areas closed 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 the shares closed above their 20-day moving average.
+ 4.05% – Virgin Money UK PLC (VUK.AX)
+ 3.88% – Alumina Ltd (AWC.AX)
+ 2.58% – Whitehaven Coal Ltd (WHC.AX)
-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 solicitation to buy or sell currency or CFD contracts. Although the information contained in this document has been taken from sources considered reliable, the author does not guarantee its accuracy or completeness, and assumes no responsibility for any direct, indirect or consequential damages that may arise from the fact that someone trusts such information. .
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