No Change in Sentiment on Tuesday
11 October 2022
The usual scene in the markets continued Tuesday, with the USD trading stronger while bonds and stocks declined.
Moreover, commodities remain under pressure, with oil slowly erasing last week's massive gains and falling below the 90 USD threshold. At the same time, silver has erased nearly all of the steep gains achieved in October.
Fed vs. BoE
Sentiment remained bearish yesterday after Brainard's hawkish comments. According to Brainard, even after the Fed stops raising rates, restrictive monetary policy circumstances will continue, and the central bank will likely continue raising rates in the near future.
Additionally, Brainard cautioned that higher rates may cause the US economy to deteriorate and that the Fed will only loosen policy once it is confident that inflation is declining.
Brainard reiterated past signals from the Fed, saying the central bank will use data to inform future rate increases. The impending US CPI inflation data, which is anticipated to indicate that inflation maintained at close to 40-year highs through September, is the primary topic of discussion this week.
In contrast, the Bank of England introduced new monetary policies to help the banking sector. The central bank increased its daily temporary quantitative easing bond purchases to 10 billion GBP for the forthcoming days. However, the purchases are expected to conclude on Friday.
The US economic calendar will include the NFIB Business Optimism Index and the IBD/TIPP Economic Optimism Index. Still, it's probable that the market's sentiment will continue to have an impact on the markets. Investors will also pay particular attention to central bankers' comments.