Minutes from the Federal Reserve’s monthly December meeting showed Fed officials’ increasing desire for a faster path of interest rate hikes and a shrinking of the bank’s $8.8 trillion balance sheet. Financial markets were caught unawares with major share indices trading down, with the tech-heavy Nasdaq 100 tumbling 3.1% after the release, while the 10-year Treasury rate crossed the 1.70% mark. Trading on Thursday continued to be volatile.
It appears that the fed is now determined to make inflationary control the key focus of its monetary policy stance for 2022. Inflation appears to have superseded continuing concerns surrounding slowing global growth, China’s regulatory crackdown and supply chain issues.
Cable, the GBP/USD exchange rate, traded at a high of 1.3595 on Wednesday and is currently trading around 1.3518 mark with the dollar gaining some strength vis-a-vis the British pound. Safe-haven currencies tend to do well in times of volatility.
The release of the minutes proved to be the major event of what was a relatively quiet data week shortened by the New Year’s Day holiday.
Economic Calendar:
- Fri 7th Jan 05:00 EUR CPI (YoY) (Dec)
- Wed 12th Jan 08:30 USD Core CPI (MoM) (Dec)
