Market News & Analysis
FOMC Recap: Statement Little Changed but Q&A had Some Excitement
Joe Perry December 12, 2019 8:20 AM
As we noted in yesterday’s Fed Preview, there wasn’t much changed from the November statement, other than to say that the Fed was leaving rates unchanged this month at 1.50% to 1.75%. Last month was the final cut in the mid cycle adjustment, and as promised, Fed Chairman Powell and the Committee left rates on hold. However, this time the decision was unanimous. In addition, the Fed sees no change in rates through 2020 according the Fed’s dot plot forecast. As of the time of this writing, according to the CME FedWatch Tool, the market is pricing in a 93% chance of the Fed leaving rates unchanged at the January 29th meeting.
Source: City Index
But there were some fireworks in the press conference Q&A afterwards. When asked about year-end funding in the repo markets, Jerome Powell said that the Fed was open to purchasing coupons, not just Treasury bills. As a result, the US Dollar began falling, and bonds and stocks went bid. The reason for these moves is that, as the market has been suspecting, this is more “Not QE”. (Remember “Not QE” is a term Powell used as the Fed was providing liquidity to overnight repo markets, which is essentially QE)
Source: Tradingview, City Index
Although there was little fanfare in the FOMC statement itself, the Q&A was much more interesting. It will be important to watch over the next few weeks how the Fed responds to the possibility of a liquidity crunch into the end of the year. The main question will be: Does the Fed have to provide more “Not QE” into year end?
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.