1 Minute Market Rundown – 21st September 2022

Putin Escalates
Fed to Raise, the Question is How Much?
Risk Continues to Suffer

My morning saunter to work, on what is usually a quiet day ahead of the FOMC rate decision this evening, turned into a sprint as Putin spoke about his next moves in the Ukraine conflict. This morning he has announced partial conscription with another 300,000 troops enlisted, a huge rise in weapons funding and production along with the statement that he is not bluffing about using nuclear weapons. As an admittedly terrible poker player, you don’t say you are bluffing unless you are, so whilst I take this with a pinch of salt it is a ratcheting up of the narrative and the markets have reacted accordingly. Euro and its crosses have sold off sharply, with the headline pair trading down 0.9885 at the time of writing. It has been a stark reminder of the issues facing the globe but more specifically the European area and I believe Euro crosses have become a sell again on rallies. EUR/CHF, EUR/GBP and perhaps even EUR/YEN will underperform from here on in. My reluctance to add EUR/USD here is solely down to the rate decision from across the ocean tonight.

Chairman Powell will announce the rate decision at 7 pm our time with 75Bps priced in and the lottery ticket of 100 being the shock move. I believe we will get 75 but as per usual the more important feature will be the press conference afterwards. Over the last few months rate decision day has been good for risk as the markets have seized upon comments that could indicate a softening in stance. For me, we saw a sea change in the 11 minutes of Jackson Hole testimony where Powell was short, sharp and hawkish as hell. I suspect we will see a continuation of that narrative later and I believe he will offer little in the way of crumbs on comfort. Watch out for the dot plot chart indicating a lack of cuts until 2025 as the key to what he may say later.

Risk markets are heavy and in a perilous position. Sadly with my above view laid out I struggle to see much of a bounce from here, and if we do I will be forced to sell it. My bullish Q4 view remains but is being put in a box for now!

In this environment sadly I cannot write in a bullish manner about Crypto. Whilst I believe we will look back at these levels as a bargain in 12 months time, for now the downside is the danger if the FOMC plays out as I suspect. 17,400 and 1250 are the levels to watch in BTC and ETH that could open the door to more pain.

Richard Usher – Head of OTC Trading

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Richard Usher
Written by
Richard Usher

Richard Usher, our Head of OTC Trading, has spent nearly 30 years in the world of Banking specialising in Foreign Exchange (FX) trading before combining his knowledge of these markets with Crypto. Most recently Richard was Head of FX for Europe the Middle East and Africa at J.P.Morgan, following on from his role as Chief FX dealer at Royal Bank of Scotland.

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