Trading Plan – Monday 11th April 2022: Central Banks in the limelight this week
Last week was all about a hawkish Fed. On Tuesday, Federal Reserve Governor Lael Brainard managed to spook markets by saying the Fed may “reduce the balance sheet at a rapid pace as soon as May”. Then on Wednesday, we had the FOMC Meeting Minutes, where it was reported that “many” voters see one or more 50bp hikes as appropriate, and a desire to “move the stance of monetary policy toward a neutral posture expeditiously.” Neutral is considered to be 2.4%, a long way from today’s 0.25 to 0.50 percent. There is also a plan to prune the balance sheet by $1.1 trillion per annum, with approval expected at the May meeting.
Risk sentiment was indecisive every day of last week. Across the 5 days, equities moved down a little, oil was static, and GOLD rose a smidge. On currencies, the JPY fell, and the AUD and CAD rose, but all ever so slightly. The USD rose and the EUR fell, as per my bias, and the GBP moved up a little. I have no bias for the GBP currently.
I placed no trades last week due to the non-committal sentiment.
This week we see the first major risk event being the initial round of the French Presidential Election. Marine Le Pen seems to be sneaking up on incumbent Macron who has not been campaigning, instead choosing to preen in front of the cameras as the de facto European leader when it comes to all things Ukraine. Macron must have been nonplussed to see our own opportunist PM BoJo sashaying through the Kyiv rubble on Saturday with President Zelenskyy. Getting back to the election, markets will react (badly) if Le Pen does well.
On a more serious note, we have rate decisions and statements from the European Central Bank, the Bank of Canada and the Reserve Bank of New Zealand.
We will be back tomorrow.
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