Daily Market Comment – Nerves calm down but risks still loom

  • Mood improves, helped by signs that Biden’s fiscal agenda isn’t dead
  • Dollar pulls back, sterling recovers in a relatively quiet FX market
  • Stocks and oil prices bounce back, Turkish lira stages epic comeback
Risk sentiment stabilizes 

Global markets started the week on a soft note amid worries that the lightning-fast spread of Omicron would curtail economic growth at a time when central bank liquidity is evaporating and government spending is being rolled back. Thin trading volumes because of the holiday season likely acted as an accelerant for the sell-off.

The good news is that the bleeding has stopped for now. Asian and European shares have bounced back, Wall Street futures point to a positive open today, and oil prices have stabilized alongside most commodity currencies. It is worth noting that the S&P 500 rebounded off its 100-day moving average yet again. 

What calmed the market’s nerves isn’t entirely clear, although some signs that President Biden’s fiscal agenda isn’t completely dead likely helped. Senator Manchin’s stark refusal to support the spending program was interpreted as a fatal blow to the Democrats’ plans but it seems the negotiations will continue next year after all, providing a glimmer of hope. 

Dollar cools, sterling breathes

The FX arena has been remarkably stable considering the heightened volatility elsewhere, with most major currency pairs trading without a clear direction. Dollar/yen has been the epitome of this relative tranquility, thanks to the defensive qualities of both the greenback and the yen. 

In contrast, sterling has been in the eye of the storm, caught between the Bank of England’s surprise rate increase and the wild swings in risk appetite. The prospect of stricter restrictions to battle Omicron before Christmas is also lurking in the background, preventing the pound from staging a proper comeback. 

Looking ahead, the key themes for the currency market next year will be shifts in central bank policy and how risk sentiment evolves. This is a recipe for higher volatility as FX traders will have to grapple with inflation surprises and any panic episodes in markets, which could become more frequent as liquidity gets withdrawn from the system.

For now, the risk is some flash crash happening in a very illiquid holiday market. 

Turkish lira fights back

The Turkish lira has been all the rage lately, with central bank rate cuts in the face of accelerating inflation bringing the currency to its knees until local authorities signaled they’ve had enough yesterday. The government essentially said it will protect the holders of lira deposits, compensating them for FX losses that exceed interest rates offered by banks. 

Of course, there are many questions about whether this program would cool inflationary pressures and how it would be funded, something reflected in derivatives markets signaling a higher risk of default on Turkish debt. But as far as stopping the lira’s freefall, it has worked wonders, with the currency recovering 15% of its value as the psychological signal alone sparked a short squeeze of epic proportions. 

As for today, the economic calendar is low key. The spotlight will fall on Canada’s retail sales after a rough couple of months for the loonie, which has been trading in lockstep with struggling oil prices. Overall, markets will continue to take their cue from any news around Omicron, central banks, and the US fiscal agenda. 


Bitcoin retreats after hawkish FOMC minutes – Cryptocurrency News

Technical Analysis – EURGBP stays stuck between two diagonal trendlines

Daily Market Comment – Markets struggle for direction as Fed keeps its options open

免責聲明: XM Group提供線上交易平台的登入和執行服務,允許個人查看和/或使用網站所提供的內容,但不進行任何更改或擴展其服務和訪問權限,並受以下條款與條例約束:(i)條款與條例;(ii)風險提示;(iii)完全免責聲明。網站內部所提供的所有資訊,僅限於一般資訊用途。請注意,我們所有的線上交易平台內容並不構成,也不被視為進入金融市場交易的邀約或邀請 。金融市場交易會對您的投資帶來重大風險。


本網站的所有XM和第三方所提供的内容,包括意見、新聞、研究、分析、價格其他資訊和第三方網站鏈接,皆爲‘按原狀’,並作爲一般市場評論所提供,而非投資建議。請理解和接受,所有被歸類為投資研究範圍的相關内容,並非爲了促進投資研究獨立性,而根據法律要求所編寫,而是被視爲符合營銷傳播相關法律與法規所編寫的内容。請確保您已詳讀並完全理解我們的非獨立投資研究提示和風險提示資訊,相關詳情請點擊 這裡查看。

我們運用 cookies 提供您最佳之網頁使用經驗。更改您的cookie 設定跟詳情。