1 Minute Market Rundown – 28th July 2022

FOMC Raise 75 Bps
Risk and Crypto Rally Hard
Forward Guidance a Thing of the Past

So the FOMC raised 75Bps as widely predicted. As mentioned yesterday the fireworks had to wait for Powell to step up to the mic before the markets moved. He indicated the FED has reached neutral rates (a little lower than most had suggested) and indicated whilst he expects rates to rise further it will depend on data leading into each meeting. He referred a couple of times to unusually large recent rises which the market has taken to be the end of 75 Bps rate hikes. Stocks rallied hard, Crypto rose back to the top of its recent ranges and the USD fell over a percent across the board.

Forward guidance has clearly become a dirty phrase, which is never good news for markets that like predictability, as the ECB and now the FED have walked away from it. The difference between the 2 main CB’s in the world is that the FED has told us what to watch, inflation data and the jobs market. Whilst both remain strong rates will rise, but watch for any sign of turning for the markets to flip. The ECB has given us less to work with. Their policy decisions still appear to be based around shots of tequila and an arm wrestle between Germany and Italy. This makes me happy to fade the rally in Euro/Usd over the next few trading sessions with 1.0240 and 1.0300 the ideal entry points.

Broader risk markets are a trickier call. My view of a strong rally in Q4 remains intact and even underscored, which makes my call to sell the rally over next few days harder to have conviction in. That said, I will make the call nonetheless. Inflation is romping still, earnings are muted at best and the economic situation is deteriorating. Month end flows will lead to some random moves and some opportune levels, I will use them to set shorts in risk markets.

Sadly this means I am yet to be convinced by the Crypto rally. We have taken profit on our extra ETH longs from Tuesday and, yep here it comes, continue to respect the range laid out many times in this piece recently.

Good luck all!

Richard Usher – Head of OTC Trading

Richard Usher

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