Week to Dec 17th

Fed confirms taper acceleration, dollar up, equities down

MY CALL THIS WEEK : SELL USDCAD

THIS WEEK

As expected, the Fed doubled the pace of taper this week in response to runaway infation (worse this week), and forecast three rate hikes in 2021, the first in January. The BoE delivered a surprise rate rise of 0.15% which made GBP the second strongest currency after the dollar this week.

Markets sold into the Fed, and after a brief spike on the announcement, fell again, with rate-sensitive NDX underperforming. The dollar did the reverse, rallying into Wednesday, spiking down then rallying again. Gold was back up over $1,800 for the first time in three weeks, and Oil had relatively low volatility, despite the weak CAD move. Yields were down, in an inside week that partially reversed last week.

WEEKLY PRICE MOVEMENT

The biggest index mover was NDX, down 3.25%, in what was still an inside week. The top forex mover was USDCAD up 1.31%. Bitcoin and Ethereum were flat after last week's drop, and FANG performed even worse than NDX, except for FB.

Last week’s AUDNZD short made 0.23%, taking my year to date profit to 5.83% and 33/49 wins. This week I will take the reversal of the top mover and short USDCAD.

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.

NEXT WEEK

The four-day week will be quiet as traders wind down for the Christmas holiday. The US, Europe and the UK (half day) will be closed on Friday. On the calendar is the relatively unimportant final GDP reading from the UGK, US and Canada, which are estimated to be in line with preliminary readings. Even PCE (Fed's preferred method of inflation) of low interest after Fed have already spoken on taper acceleration. Other than this, the week is traditionally bullish.

CALENDAR  (all times are GMT)

Monday December 20

01:30 PBoC Interest Rate Decision (e3.85% hold)

Tuesday December 21

00:30 RBA Meeting Minutes

07:00 Germany Gfk Consumer Confidence

13:30 Canada Retail Sales (MoM e1.2% p-0.6%)

15:00 Eurozone Consumer Confidence

23:30 Aus Westpac Leading Index

23:50 BoJ MPC Minutes

Wednesday December 22

07:00 UK Q3 Final GDP (e1.3% p1.3%)

13:30 Chicago Fed National Activity Index

13:30 US PCE QoQ

13:30 US Final Q3 GDP Annualised (e2.1% p2.1%)

15:00 US Consumer Confidence

Thursday December 23

13:30 US PCE MoM & YoY

13:30 US Durable/ND Capital Goods (Nov Durable e1.5% p-0.4%)

13:30 US Jobless Claims

13:30 Canada Q3 GDP

15:00 Michigan CSI

15:00 US New Home Sales

23:30 Japan National CPI

Friday December 24 

No releases