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Markets Revel on FOMC Minutes

By Stephen InnesMarket OverviewNov 24, 2022 03:39AM ET
www.investing.com/analysis/markets-revel-on-fomc-minutes-200632735
Markets Revel on FOMC Minutes
By Stephen Innes   |  Nov 24, 2022 03:39AM ET
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Equities are reveling in the wake of the FOMC minutes after the Fed telegraphed a downshift from jumbo to extra-large rate hikes. Although we'll see a slower pace of rate hikes, the terminal rate will be higher than markets had anticipated.

Still, investors have welcomed a perceived reduction in uncertainty around the Fed's terminal rate. The tail risk of tightening much above 5% has been substantially reduced on the back of a much better October CPI report. Into year-end, positive global risk sentiment could easily persist, mainly if there is another good inflation reading for November. 

Oil

Oil prices had steadied earlier this week, as fears about the effect of China's Covid surge and subsequent snap lockdowns were primarily offset by concern about oil supply ahead of the EU embargo on Russian crude. 

However, a G7 price cap is reportedly being considered in the $65-70/b range, higher than expected and similar to the discount Russian crude trades. Hence traders pared longs, thinking the cap would have a little bite to impact Russian Crude exports materially.

There is also a 45-day grace period, allowing crude loaded on the day the EU embargo takes effect (December 5) to be sold for delivery as late as mid-January. 

All of which suggests a much less significant hit to pre-year-end Russian crude supply. 

Foreign Exchange

The dollar is falling as US Treasuries and equity markets rally, even though nothing was new in the minutes. But with rates volatility diminishing, a dynamic that has been USD-positive through 2022, the window is open for more dollar sales into year-end, provided risk sails on an even keel.

Markets Revel on FOMC Minutes
 

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Markets Revel on FOMC Minutes

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Comments (2)
Joe Rizzuto
Joe Rizzuto Nov 24, 2022 4:31PM ET
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bogus manipulation by the fed. why was Bullard a few days ago talking up higher for longer when he knew the minutes from meeting 3 weeks ago were talking about slowing the pace? garbage! the fed should meet every month. minutes should be out the next day. fed bobbleheads can say whatever they want in between.
Dweeptaru Das
Dweeptaru Das Nov 24, 2022 1:51PM ET
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the bottom line is clear, equity markets will remain on the upside till the yearend and fall from the January of 2023
 
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