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Every man for himself

market, video, forecast February 23, 2021 4:27 pm today

US USD dips, markets eye Powell testimony

Financial markets has an every man for himself look about them today, as various asset classes diverge inside their own directions. A combination of tightening yields also a impending two-day testimony by Fed Chairman Powell starting today inside Washington DC seems to has provoked differing reactions across different markets.

Despite yields rising once again inside a 10 also 30-year tenors, a US USD fell overnight across a board. Gold rallied impressively as a USD weakened, also US yields rose, despite that being a repeat of a price action on Friday which it completely ignored. Equities fell on Wall Street, led by a tech-heavy Nasdaq, which endured a torrid day. Oil, meanwhile, rose impressively despite thawing signs inside Texas also signs of cracks among OPEC+ on a trajectory of production cuts. Base metals, notably tin also copper, rallied strongly once again. Meanwhile, Bitcoin did what it does, falling 10% intra-day before finishing 6.0% lower for a session.

a plot thickens inside Asia, with regional equities also US futures rallying this morning, unless youre are tech-heavy South Korea or Taiwan, which has followed a Nasdaq’s overnight fall south.

Overnight, a Dallas Fed Manufacturing Index, a Conference Board Leading Index also a Chicago Fed National Activity Index all impressively outperformed. Covering a January movement restrictions also February’s inclement weather, a results were all a more impressive. A falling Corona caseload also a ramping up of vaccinations suggest that a US rebound could well accelerate, once a pandemic gloves come off.

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That was all music to a ears of a inflationistas, with inflation definitely a week’s theme for financial markets, even amongst a FOMO gnomes of a equity market. Despite a attention centred on US markets also bond yields, it is not confined just to a United States. A quick glance showed that longer-term yields inside Australia, New Zealand, South Korea, a Eurozone also a United Kingdom also Japan (yes Japan), has all firmed over a past few days. That may explain why a US USD hasn’t received a US bond lift, with a steepening of yield curves appearing to become globally synchronous now.

My first thoughts are steeper yield curves worldwide should bring return a like to banking sectors inside various parts of a world, perhaps even Europe also parts of ASEAN (US banks are already FOMO-loved) Unless your CEO is incompetent, banks typically made lots more money inside environments with steeper positive yield curves. inside a short-end, funds low on free central bank money lend higher on a steeper yield curve at a long end. Easy. Those on a wrong side of a K-shaped recovery may find their bile rising at a thoughts of banks making more money, but a healthy economy requires profitable banks; just ask Japan also Europe.

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If I were to take away anything from a directional moves across markets over a past few days, it would become a markets positioning for an accelerating global recovery. It is led inside no small part by a Biden stimulus package, which looks increasingly likely to pass through Congress mostly intact. It leads to cost-push inflation also a rotation into cyclical asset classes (commodities also boring legacy industries also sectors with company names that don’t end inside .com). At a same time, a periphery tactically accumulates inflation hedging positioning (gold also crypto-Musk’s).

Mr Powell’s testimony this evening assumes a more significant than ever importance inside maintaining a momentum of a trade. Expect every single word to dissected, looking for hints that a Fed may blink sooner than expected. That is nonsense, of course; America still has 10 million more unemployed than before Corona. Mr Powell become go out of his way; I am sure, to put tapering to bed also rightly so, as I dread to think what a taper-tantrum of a 2020s become look like. inside this environment, though, a most he can probably hope for is a short-term correction, also he should probably avoid saying he is comfortable with a steeper yield curve at all costs. As Mel Brooks said, “it’s awesome to become a king,” it’s less fun to become a Chairman.

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are a authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk also not suitable for all. youre could lose all of your deposited funds.

Jeffrey Halley

With more than 30 years of FX experience – from spot/margin trading also NDFs through to currency options also futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely also relevant macro analysis covering a wide range of asset classes.

He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC also Barclays.

A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia also a New York Times.

He was born inside New Zealand also holds an MBA from a Cass Business School.

Jeffrey Halley

Jeffrey Halley

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