1 Minute Market Rundown – 30th August 2022
Powell Speech Short But Not Sweet
Risk Sell Off
Usd Up But Lacking Momentum
Jackson Hole came and went in the blink of an eye on Friday, but it may prove to be the most significant 10 minutes of the year so far. The market had been hoping and praying for a dovish pivot or at least signs of a slowdown in the pace of hikes. They didn’t get it.
Powell spoke for just 10 minutes instead of the slated 30. He was robust, forthright and frankly determined to send a clear message that rates are going and staying up. Inflation will need to start coming down and staying down before there is any sign of hikes stopping let alone a dovish pivot. The rates market took the lead with both 2 year and 10 year yields making new highs for the year. Stocks rolled over with the dow and nasdaq both shedding over 3 percent. BTC and Eth both broke lower trading down to 19,500 and 1440 respectively. The Usd rallied hard with Euro retesting 0.9900 and Usdyen trading back to 139.00.
The question becomes where from here? Well the big winner will be volatility in my opinion. It is hard to see how risk assets can rally in this environment and when one looks at seasonality September is often the worst performing month for stock markets. We will enter a scenario where strong data is almost a negative as it will embolden rate hikes and weak data is also a drag as it will show the effect of these rate rises squeezing the economy. The fact remains that the market is holding a lot of cash which may explain the lack of follow through yesterday, so i will look for levels to sell on rallies.
The Usd is such an attractive proposition for the short term that I find it hard not to recommend continuing my mantra of buying on dips. I believe we will see Euro at 0.9700, Usd/Jpy at 142.00 and Gbp/Usd at 1.1500.
Crypto will simply struggle to sustain a rally in this environment. I have squared my shorts purely from a risk management perspective but will look to sell into rallies at 21500 and 1650 again.
Timing is going to be key. We have month end and Non farm Payrolls this week which could see volatility and opportunities in equal measure, so I am light on positions and sticking to the plan.
Good luck all.
Richard Usher – Head of OTC Trading
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