Open: London Session | Forex, Metals, Oil, Agriculture November 03, 2022

investors

Currencies

Risk reversals, a barometer of market positioning and sentiment, remain in favor of the dollar, yet are trading at less bearish levels for sterling than those seen last month. In combination with notably more dovish pronouncements from other central banks, the dollar naturally strengthened once more.

United States

We should spend more time thinking about these things, and much less time trying to predict the Fed s path to its maximum rate. The Fed has an established mechanism for guiding on where it thinks the peak rate is heading, in the dot plot that comes out four times per year. So, yes, it was quite possible the Fed would slow down, but what really mattered was the peak rate, and on this the Fed was growing more hawkish. Coming Up European stocks are on course to follow their Asian and US counterparts lower as traders assess the Fed’s outlook following another 75-basis point hike.
The Powell Fed has often seemed to go out of its way to featherbed the market impact of its actions. CPI reports, labor reports, and the ongoing impact of China s zero-Covid policy on global growth are all more important than any signal of Fed action. Points of Return What the Fed giveth, the Fed taketh away an hour later (if it s so minded). Higher Fed rate, a jumbo hike is coming in England and Olaf Scholz wants cooperation with China.
The Fed has hiked a long way in a hurry, and it s accepted that monetary policy only affects with a lag. Markets took Powell at his word, and bid up their estimates of future fed funds rates.

China

Scholz will travel to Beijing on Friday to meet with China s president, Xi Jinping, amid concerns about European dependency on Chinese products.

Europe

The ECB doubled its key interest rate to 1.5% last week as it grapples with record inflation. She s expected to try to reassure them that her administration will play by EU rules, while seeking change. Her visit sends an important message on support for Ukraine, an EU official told us.

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