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Uncertainty creeps in following the latest news from Afghanistan, Fed’s meeting - Market Overview

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Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
Markets plunged after tensions in Kabul escalated during the evacuation process, leading to the loss of lives.

US indices fell as soon as the word came out, and their European counterparts quickly followed. However, tensions were already present before the attack occurred, mainly due to Fed’s meeting in Jackson Hole.

How the US Central Bank can change everything

Today afternoon, Jerome Powell will hold the first speech at Jackson Hole. Although the likelihood of him announcing the start of the tapering process is low, any hints about this topic could cause significant market movements such a massive Dollar buying and bond selling.

Three Fed voting members, Kaplan, Bullard, and George, have already spoken in favor of withdrawing the bond purchase program as soon as possible due to a favorable evolution of the North American economy, both in growth and in the labor market. They have also manifested their concerns about the growth in price values which could signal an inflationary process.

In this regard, the PCE price index (personal consumption expenditure – one of Fed’s favorite barometers for measuring inflation) is scheduled for publishing later today. A better-than-expected figure could pressure the Federal Reserve to put an end to its ultra-expansionary monetary policy.

The 10-year American bond, Tnote, fluctuated around the lower part of its last day's price (its current support level), waiting for news from Fed, and pressured by the latest US economic data.

North American indices sink

The major US indices all lost around 0.50%. Of all of them, USA30 would theoretically be the least affected if Fed took a decision that would lead to a rebound in long-term interest rates, such as the beginning of tapering. Therefore, corrective movements cannot be ruled out.

Getting back to USA30, the index finds its closest support in the area, around 34,500, close to the 100-day SMA line. In any case, even taking these potential corrections into account, the uptrend remains intact and could only be jeopardized if the index falls below 33,700.

Sources: Bloomberg, reuters.com.

This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided. 

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.