Daily Alert – Thursday 14th December 2023: Fed delights markets with dovish pivot

Mark NugentDaily Alert, December 2023

Daily Alert – Thursday 14th December 2023: Fed delights markets with dovish pivot

Good afternoon. 

Last night the Fed managed to delight the markets. The famous “dot plot” showed a significant pivot to the dovish side, with the FOMC voters forecasting an additional three 25-basis-point reduction over their September forecast. Fed Chair Powell also said that the committee was actively discussing cuts.

Equities rose significantly and the USD fell. I traded the S&P500 long after watching it closely between 7pm and 730pm to ensure that the volatility had calmed down. So far, we are around 1x risk (2%) in-the-money, but of course, it is not a real profit until I close the trade. 

I also took a WTI trade, long. A lot of the upwards movement in WTI yesterday was probably due to the Fed announcement, and we need to be careful of essentially trading the same move but with different assets, so I limited the risk to 1%. It is doing quite nicely as well. 

The European Central Bank maintained their rate at 4.0%, did not mention cuts and was seen as relatively hawkish. The EUR rose. 

The Bank of England maintained their rate at 5.25% with 3-0-7 vote. That’s three members voting for a hike and seven voting to hold steady. So, the bank is clearly not yet thinking seriously about cutting the rate. Again, this was seen as relatively hawkish. 

I will spend the rest of today and tomorrow managing my two trades. 

Have a great weekend when it comes, and I’ll be back on Monday for the last trading week of the year.

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