Given the way it’s going in Ukraine, it’s not the best time to be talking tough but Russia is on the wires warning Bosnia and Herzegovina that it will face the same fate as Ukraine if it decides to be a part of NATO.
Archives of “March 17, 2022” day
rssEuro rises for the fourth consecutive day; hits session high
The US dollar remains on the defensive in the unwind from the Fed trade.
It’s tough to pin down what’s behind the euro rally. Earlier in the week, you could pin it on hopes for a ceasefire in Ukraine and stability in sanctions but with Russia cooling those hopes for today (leading to the rally in oil and gold) that’s a tough sell today.
In the technical picture, it’s all consolidation so long as we stay below 1.1121 and that might be a good level to sell against on a low-risk trade if the momentum stops after the fix.
The only thing I can see on the fundamental side is compression between the US and Europe. ECB policymakers are staying dovish (though Knot today showed some flexibility). I find it tough to believe the US will continue to tighten above neutral while the ECB is able to stay close to zero with its inflation-only mandate. That’s particularly true with the energy pressure on Europe and more of an appetite for green investment/carbon taxes.
At the same time, all that might be balanced by a deteriorating growth outlook.
It’s all a matter of perspective.
Some post-Fed musings
Ten hours later and I would wager that most of the market is still trying to wrap their heads around the Fed communique yesterday and what does that all mean moving forward. The market reaction has been less straightforward and that is making for a tougher time to digest everything so far.
The Fed hiked by 25 bps as expected, with Bullard the only dissenter (wanting a 50 bps move). The dot plots showed 7 rate hikes for this year with 4 more to follow in 2023. But the Fed did lower growth projections and upped its inflation forecast. And Powell’s press conference was not too assuring I would say, though at least the door for QT is open for either May or June.
So, what exactly can we really take away from the FOMC meeting conclusion yesterday?
The Fed wants to believe that it is hiking rates to curb out-of-control inflation and keep the economic expansion going. Or at least that is what they want you to believe. That ties to my point here yesterday, that markets are seeing it as either the Fed goes with an aggressive tightening cycle or risk a recession.
The reaction in equities is perhaps telling with US stocks rallying towards the end of the day, though it is hard to really make sense of that when you pair it with the prospect of 2% rates by year-end.
That said, most of this is already somewhat ingrained into the market’s thinking. Adding to that is the reaction in Treasury yields:
Yields surged ahead initially before coming back down and that does point to some uneasiness as to whether the Fed can go through with this tightening cycle without any hitches.
It’s still early to gauge the overall reaction and we’ll have to see how things play out in the coming days. So, I wouldn’t jump to any conclusions just yet.
But in the bigger picture, it feels like the market is seeing what it wants to see. I talked about how while the Fed is trying to give the illusion that rate hikes can help with inflation and the economy, it really isn’t going to do anything whatsoever.
I fear that is a reality that will become more evident in the coming months, more so with the yield curve flattening further post-Fed.
As for the dollar, it’s tough to consolidate why the greenback continued to underperform yesterday (besides against the yen). But it would seem if a more hawkish Fed is failing to rile up the bulls, it will be tough if the Fed has to backtrack on its tightening cycle if the economic momentum grinds slower in the quarters ahead.
I mean, essentially that is what they are already expecting with dot plots showing lower rates in the “long run”.
Europe’s largest energy traders have called on governments and central banks to provide “emergency” assistance to avert a cash crunch as sharp price moves triggered by the Ukraine crisis strain commodity markets. Otherwise known as “bailout”.
UN Security Council’s Western members ask for an emergency Ukraine meeting Thursday For 17 March 2022
The UNSC has five permanent members:
- China, France, Russian Federation, the United Kingdom, and the United States
and ten non-permanent members elected for two-year terms (end of term year):
- Albania (2023)
- Brazil (2023)
- Gabon (2023)
- Ghana (2023)
- India (2022)
- Ireland (2022)
- Kenya (2022)
- Mexico (2022)
- Norway (2022)
- United Arab Emirates (2023)
India is looking to buy 15m barrels of Russian oil
Earlier reports were that the Indian Oil Corporation (IOC) bought 3 million barrels of Russian Urals from trader Vitol for May delivery.
Earlier this week White House Press Secretary Jen Psaki told reporters, in response to the possibility that India could take up the Russian offer of discounted crude oil
- “I don’t believe this would be violating that (sanctions)”
- “But also think about where you want to stand when history books are written at this moment in time. Support for the Russian leadership is support for an invasion that obviously is having a devastating impact”
Major US indices close at session highs
- The Dow close higher for the third straight day
- consumer discretionary’s rose 3.4%
- technology rose 3.3%
- financials rose 2.8%
- communications rose 2.8%
On the downside,
- energy fell -0.5%
- utilities fell -0.2% consumer staples rose 0.1%
For the day, the major indices are all sharply higher:
- Dow industrial average rose 518.74 points or 1.55% at 34063.12
- S&P index up 95.49 points or 2.24% at 4357.92
- NASDAQ index up 487.94 points or 3.77% at 13436.56
- Russell 2000 rose 61.75 points or 3.14% at 2030.72.
Of note technically, the S&P index moved up close to its 200 hour moving average at 4360.54. The high price today reached 4358.90. On March 3, the price moved up to test that moving average only to find sellers leaning against the level. That makes the open and trading day tomorrow a key event technically for the broad market index. Move above and stay above will be more bullish.
Thought For A Day
