According to what has been published, some Fed members agreed that setting dates for the so-called "tapering" process needs to happen sooner rather than later.
Although no precise dates have been mentioned, the mere fact that it appeared in the Fed minutes was enough for the market to have a reaction. It is becoming increasingly clear that if inflation data continues to show an upward trend, and if the labor market recovers, the Fed will have no choice but to eliminate its stimulus policy gradually. This could significantly impact many financial assets, especially if the policy change has to be carried out earlier than the market and analysts expect.
The rise of the U.S. Dollar
Upon the release of the Fed's minutes, the U.S. Dollar experienced an upward movement. However, much of it has been reversed today, proving that the currency market is in a moment of indecision and lacking clear direction.
U.S. Treasuries fell slightly in price, and yields rose, close to recent highs. Tnote yield is trading at 1.65%, with the bond price in the support zone located around 130.80. Below this level would open the way to further losses that translate into yields above the 1.77% highs. Most investment bank research and market analysts set a target above 2% for the near future.
These expectations of higher interest rates are negatively affecting the stock markets. Indices have lost their bullish moment and are close to falling below critical support levels, potentially changing the current upward trend.
Some weakness in the oil market has also been noted in the market. The main cause is progress on the agreement with Iran. If achieved, this would allow Iran to enter the oil market by considerably increasing oil supply.
Because of this, Oil retreated from its two-days high. From a technical point of view, the reference and pivot level are now around 59.50. Below this level, more significant setbacks could happen.
Sources: Bloomberg, reuters.com.