STATE OF THE MARKETS

Dollar dived post FOMC. As US stocks rebounded and pared earlier losses on Wednesday, Dollar (DXY) dived after Feds confirmed its plan to finish taper by March and three hikes in 2022. Dow (+1.08%), Nasdaq (+2.15%), S&P (+1.63%) and Russell (+1.65%) closed higher as investors expect year end rally to continue. Dollar was under pressure below the 96.50 mark while the 10Y yielded to 148 basis points.

In the commodities market, crude was in a tight range of $71.50 – $69.20/bl as markets remain uncertain on Omicron long term impact. Gold was subdued to $1,750/oz before bidders emerged and pushed the yellow metal back to $1,780/oz at writing as inflation concerns remained. Elsewhere, iron ore jumped to $109.20/tn as news hit the wire that China vowed to stabilize her economy.

In the FX space, short and medium term traders turned bullish as the safe haven Swiss and Yen were sent to offers while Aussie, Kiwi, Sterling and Euro led the bids. Long term sentiments remained unchanged. On Thursday, markets look for earnings reports from Adobe (ADBE), Accenture (ACN), Rivian (RIVN), FedEx (FDX) and Jabil (JBL); as well as US jobless claims to gauge the labor markets.

OUR PICK – AUD/USD

Rising iron ore prices may float the Aussie. Reports from China’s annual Central Economic Work conference that the government pledged to continue its supportive monetary and fiscal policy next year sent iron ore to climb past $100/tn after months of doldrums amid flattening demand. We see recent reduction in China’s banks reserve ratio and further commitment from the Communist Party to bolster the economy next year could fuel commodities rally.

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