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By Swissquote Analysts
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A Fed decision has barely been this uncertain!

It looks like the Federal Reserve (Fed) will announce its latest monetary policy decision to a public with relatively calmer nerves compared to a few days ago.

The VIX index eased sharply from last week’s levels on bank relief, gold tanked to $1935 per ounce and indices on both sides of the Atlantic Ocean were comfortably higher on Tuesday.

The pressure on US treasuries eased, as well, and the US 2-year yield is now around the levels it was before Fed President Jerome Powell’s speech to the Senate which spurred the expectation of a 50bp hike for week’s meeting.

But, even though activity on Fed funds futures looks like it finally is pointing at a solid-ish consensus that the Fed should hike rates by 25bp today, no one really knows how much importance the Fed will assess to the latest banking stress, which, in reality, resulted in an uptick in Fed’s balance sheet due to additional liquidity, but which also tightened the financial conditions sharply.

The chances are that the Fed hikes by a final 25bp to stick to their promise to bring the US interest rates to around 5%. But we could certainly forget about a further advance to 5.5-6%.

For equities, a softer Fed and unexpected liquidity is supportive in the short run. For currencies, a dovish Fed would mean a further depreciation of the US dollar across the board.

But all that is dependent on how hawkish/dovish the Fed will sound. And the truth is, a Fed decision has barely been this uncertain.

Watch the full episode to find out more!

A Fed decision has barely been this uncertain! | MarketTalk: What’s up today? | Swissquote
Swissquote (in English)
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Equities up, bonds confused as Fed meets

Bank stocks had a volatile session on Monday. UBS lost up to 16% after the Credit Suisse deal, but closed the session more than 1% higher.
In the US, JP Morgan, Goldman Sachs and Morgan Stanley closed the day with 1 to 2% of gains. The regional US banks also had a calm session, except for the First Republic Bank - which plunged 47% after a second credit downgrade in just a week from S&P.

In bonds, the announcement of full write-down of Credit Suisse’s AT1 bonds got bond investors confused, as equities should be written down before any other paper in the ‘bonds’ category. Authorities said that equities will be written down first to end confusion.

The Federal Reserve (Fed) begins its two-day policy meeting today in the middle of a storm.

If the European Central Bank (ECB) decision serves as a cheat sheet, the Fed could hike by 25bp and say that it has tools to inject liquidity in the system to contain crisis.

Investors are also focused on what the Fed will do with the Quantitative Tightening (QT),

This morning, activity on Fed funds futures assesses a 75% chance for a 25bp hike.

The US dollar index slipped below the 50-DMA yesterday on expectation that the Fed will stay cautious at this week’s meeting given the turmoil across the financial place, while gold traded above the $2000 psychological mark on Monday, but improvement in sentiment could rapidly pull the price of an ounce to $1900 mark.

Watch the full episode to find out more!

Equities up, bonds confused as Fed meets | MarketTalk: What’s up today? | Swissquote
Swissquote (in English)