Pepperstone logo
Pepperstone logo
  • English
  • 简体中文
  • 繁体中文
  • ไทย
  • Tiếng Việt
  • Español
  • Português
  • لغة عربية
  • Ways to trade

    Pricing

    Trading accounts

    Pro

    Premium clients

    Active Trader Program

    Refer a friend

    Trading hours

    24-hour trading

    Maintenance

  • Trading platforms

    Trading platforms

    TradingView

    MetaTrader 5

    MetaTrader 4

    CopyTrading

    Pepperstone platform

    cTrader

    Trading integrations

    Trading tools

  • Markets

    Markets to trade

    Forex

    Shares

    Indices

    Commodities

    Cryptocurrency

    Currency Indices

    Dividends for Index CFDs

    Dividends for Share CFDs

    CFD Forwards

    ETFs

  • Market analysis

    Market analysis

    Navigating Markets

    The Daily Fix

    Meet the Analysts

  • Learn to trade

    Trading guides

    CFD trading

    Copy trading

    Forex trading

    Commodity trading

    Stock trading

    Cryptocurrency trading

    Bitcoin trading

    Technical analysis

    Day trading

    Scalping trading

    Upcoming IPOs

    Gold trading

    Oil trading

    Webinars

  • Pepperstone Pro

  • Partners

  • About us

  • Help and support

  • English
  • 简体中文
  • 繁体中文
  • ไทย
  • Tiếng Việt
  • Español
  • Português
  • لغة عربية
  • Launch webtrader

  • Ways to trade

  • Trading platforms

  • Markets

  • Market analysis

  • Learn to trade

  • Pepperstone Pro

  • Partners

  • About us

  • Help and support

FOMC
US500

FOMC meeting review - The Fed are not coming to the rescue anytime soon

Chris Weston
Chris Weston
Head of Research
Jan 27, 2022
Share
The market wanted assurance that the ‘Fed put’ was close by, but what we’ve seen was Jay Powell almost welcoming the tightening of financial conditions.

Jay Powell acknowledged the drawdown in equity markets was a function of policy and was to be expected - for those wanting to know how far off the Fed are from backtracking and pivoting to a less hawkish stance - well, that will be determined by the economic data, but clearly, Powell is concerned they are well behind the curve, and they really are.

My view was that Gold was a great hedge against a policy mistake (by the Fed) – that policy mistake was one where the Fed is forced to backtrack and reprice market expectations against such aggressive rate hikes over the next 12-24 months. That may still be the case, so I cannot give up on the longer-term bullish Gold view, and the flattening of the US yield is a major red flag, but that's a story for another time.

The policy mistake we’re seeing play out is one where the Fed has allowed inflation to run too hot for too long and are now having to go hard to smash the breaks – this is good for those wanting to buy the USD and short Treasuries and as a by-product, it is not good for Gold, at least for now.

As we’ve seen in a rather ugly trading session in Asia today – the Fed’s view of financial conditions is not good for equity either, as it hits home the idea that we don’t fight the Fed – and right now the Fed sees value in lower equity, wider credit, and higher bond yields – it helps lower inflation to the desired levels. So, shorts have a green light to keep selling equity and USD bulls have been re-invigorated.

I know a lot of what we heard was discussed in recent Fed communication, but there was a tone in Powell’s voice that was new, one of greater concern on inflation and he made a point that this time was different from prior periods of tightening. There was an urgency to get the balance sheet lower too.

Daily of EURUSD

Preview

(Source: Tradingview - Past performance is not indicative of future performance.)

The question for now is whether bad news (such as economic data points) becomes good news for risky assets (such as equities), as the Fed will find it harder to hike 5 times in 2022 if the data is rolling over and the yield curve is flattening – does good data, therefore, especially anything that boosts inflation expectations, become bad news for markets? Feels like that could be the case.

Till then I feel the USD goes higher and equities may find sellers on rallies.


Related articles

A wild day on markets - flow, liquidations and high volatility

A wild day on markets - flow, liquidations and high volatility

US500
USD
Short selling - how traders can open up a new world of opportunity

Short selling - how traders can open up a new world of opportunity

Forex
Gold

Most read

1

The disinflationary message seen in commodities and rates markets

2

Will the BOJ be the last dovish domino to fall?

3

Trader thoughts - the conflicting forces dictating EURUSD flow

Ready to trade?

It's quick and easy to get started. Apply in minutes with our simple application process.

Get startedSubscribe to The Daily Fix

The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients.

Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.

Other sites

  • The Trade Off
  • Partners
  • Group
  • Careers

Ways to trade

  • Pricing
  • Trading accounts
  • Pro
  • Active Trader program
  • Refer a friend
  • Trading hours

Platforms

  • Trading Platforms
  • Trading tools

Markets & Symbols

  • Forex
  • Shares
  • ETFs
  • Indices
  • Commodities
  • Currency indices
  • Cryptocurrencies
  • CFD Forwards

Analysis

  • Navigating Markets
  • The Daily Fix
  • Meet the analysts

Learn to Trade

  • Trading guides
  • Videos
  • Webinars
Pepperstone logo
support@pepperstone.com
1786 628 1209
#1 Pineapple House,
Old Fort Bay, Nassau,
New Providence, The Bahamas
  • Legal documents
  • Privacy policy
  • Website terms and conditions
  • Cookie policy
  • Sitemap

© 2025 Pepperstone Markets Limited | Company registration number 177174 B | SIA-F217

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

81% of retail investor accounts lose money when trading CFDs with this provider.

You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

You don't own or have rights in the underlying assets. Past performance is no indication of future performance and tax laws are subject to change. The information on this website is general in nature and doesn't take into account your or your client's personal objectives, financial circumstances, or needs. Please read our RDN and other legal documents and ensure you fully understand the risks before you make any trading decisions. We encourage you to seek independent advice.

Pepperstone Markets Limited is located at

#1 Pineapple House, Old Fort Bay, Nassau, New Providence, The Bahamas

and is licensed and regulated by The Securities Commission of The Bahamas,( SIA-F217).

The information on this site and the products and services offered are not intended for distribution to any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.