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.
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.
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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