Just as falling bond yields were becoming the path of least resistance, we got an upside surprise in the services ISM and hawkish comments from Fed vice chair Clarida combo.
The pre-FOMC Premium trade in NZD/USD is now over 100-pips in the green and Tuesday's Premium trade was up +80 pips until the bounce in yields. I informed the WhatsApp Broadcast Group (see below) that I remained long gold from 1812 until 1832; and that's where gold topped out before plunging after ISM and Clarida.
Services ISM hit a fresh record at 64.1 with strong gains in prices paid (82.3 from 79.5) and employment (53.8 from 49.3). Clarida doubled down on taper and rates, saying the former could start as early as this year and the latter could lift by late 2022 or early 2023. 10-year yields spiked from under 1.14% to over 1.20%, dragging metals and JPY across the board. Clarida's comments could grease the wheels of USD bulls on any sign of beat in Friday's jobs figures, despite Wednesday's miss in the ADP.
Did Clarida's comments tell us anything new? Apart from telling us he is one of the hawkish dots who made the shift at the June FOMC, not much. The division inside the Fed will likely grow wider, which will only lead them to compromise on taper in terms of size, pace and timing.