Authored by Richard Breslow, a former FX trader and fund manager who writes for Bloomberg
That dud landed with a thud. It fits the FOMC’s desired narrative to have the latest decision called a “hawkish hold.” That’s a very sympathetic description of the event. We’re supposed to take comfort that the economy really is (we promise) getting closer to meeting the necessary goals, all meetings are live and they’ve got December in their sights. I’m sure it is. But we’ve heard it all before, as well as the caveats.
If the outcome was hawkish, it’s curious that equities flew, the dollar swooned and the yield curve flattened. It’s also unlikely that anything that held them up, at least from the economy’s standpoint, will be materially different three months from now. But it does buy time.
What’s also curious is that the recent underwhelming economic releases, which caused many people smarter than I to jump to the conclusion that a hike was off, were downplayed. Indeed the statement and Chair were rather upbeat on recent trajectory.
Yet the labor market, which has been lauded to no end for it’s strength in Fed speech after speech, suddenly has more room to improve.
Data dependency is definitely in the eye of the analyst. As is how economic risks are “roughly balanced” can be interpreted. Whites of their eyes or forward looking can be chosen to fit the moment.
I’m a hundred percent sure that politics was indeed never discussed at anytime during the meeting. Wasn’t really necessary. Shadow Chairman Summers left enough tweets beforehand with the not-so-subtle subtext that elections have consequences.
So after yesterday’s moves, what levels to watch for near- term sentiment?
SPX closed yesterday right at the confluence of its 21 and 55-day moving averages at 2163. Nice pivot. More importantly, the gap left at 2180 is key to the upside, the recent lows at 2120 defines support. All close, all technically meaningful.
Gold is sitting at its 55-dma (1333) and needs to break out above 1350 or below c. 1300 to break new ground.
Treasuries remain in familiar territory. Watch resistance levels as the much more important side, because if they hold, attitudes about bond dip buying may be showing a sea change.
For the dollar, in a world at currency war, it doesn’t look set to do anything fun.
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