Insights

1 Minute Market Rundown – 27/07/22

All Eyes on the FOMC Press Conference
EUR Continues to Tumble
Crypto Bounces

After a less than eventful start of the week, yesterday started to pick up as the market started to position itself ahead of today’s main event – the Fed rate decision and the FOMC press conference to follow. The US Dollar closed off yesterday looking perkier after having recovered some of its losses from Monday. This saw GBPUSD retreat from resistance at around 1.2090 before bouncing off support at 1.1960. Whilst EURUSD followed a similar pattern here as it tumbled close to 1.0100, the moves were more aggressive as also fuelled by the uncertainty around the availability of natural gas (pardon the pun) and mounting recession concerns.

Today kicks off with a softer CPI from Australia as inflation came in at 6.1% compared to the forecast 6.2% – potential affirmation of speculation that inflation is slowing globally and may be reaching its peak. If the Australian CPI is the starter, the Fed rate decision later today is the main course with the Fed expected to hike rates by 75 bps. This feels to have been priced in by the market pretty well already and any volatility here will likely come from a deviation from this. I feel that with the Fed’s, and especially Powell’s, uber hawkish stance and commitment to curb inflation at the expense of a recession, the risk of a 100 bps increase is more likely than 50 bps. However, the recent woeful economic data leaves them a balancing act on their hands and there is a significant chance of a softening in their stance. Generally, the desk is of the opinion that anything above the expected 75 bps would see USD spike and risk markets get hit. A more dovish 50 point hike would undermine the Fed’s hawkish stance and could signal a high is in place for the greenback. If we get the widely expected 75 bps all eyes will be on the FOMC press conference though and their narrative on future hikes and the balance between managing inflation and the impending recession.

Turning our attention to crypto, we expect it to move in tandem with the wider risk market. As mentioned yesterday, profit taking ahead of the Fed today saw BTC and ETH drift off, but in line with the trade idea yesterday, ETH has bounced back and is now trading above $1450. Despite a slightly more muted response, BTC followed suit and is trading above $21000 after hitting $20750 yesterday. Going into the Fed decision and press conference, as a desk we’ll be looking to go into the event light of any USD positions. We also continue to be short EURCHF cash and hold EURUSD downside puts.

Good luck all!

Diogo Da Silva – OTC Trader

1 Minute Market Rundown – 27/07/22

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