Stock Jitters Continue, US Dollar Firm Ahead of Key FOMC Report
Stock jitters continue during the week while the US dollar consolidates ahead of key FOMC minutes from Fed’s last meeting.
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Principal Points
- Global stocks remain jittery as Fed Chair Powell is set to continue with policy changes
- US dollar steady near recent highs as traders expect latest FOMC meeting minutes
What’s Moving in the Markets?
Stocks on both sides of the Atlantic endured a choppy trading session on Tuesday. Market jitters remained a day after Jerome Powell secured another four-year term as Fed chair.
In more detail, global stocks mostly dropped Tuesday led by a slide in technology companies. As a result, Facebook lost more than 1%, while Netflix and Microsoft slipped 0.8% each.
The US dollar, on the other hand, maintains its strong positions against major currencies in the forex market. What boosted the greenback’s value was bets from investors that the Federal Reserve, under Mr. Powell’s second term, could rush to raise interest rates.
More specifically, Jerome Powell could step up his efforts to introduce monetary policy changes sooner than expected to tackle inflation.
Several reasons contributed to the defensive stance in the broad financial markets yesterday. In fact, these same drivers continue to pressure the market mood early on Wednesday.
What’s the Big Picture for Traders?
First, higher-than-expected inflation pressures have stayed for longer than anticipated. Moreover, price increases are now showing signs of being permanent. On this note, the Fed’s remarks that inflation is transitory might not materialize unless measures are taken.
Against this backdrop, the US central bank might be forced to accelerate the pace of bond buying. That means we could see quicker tapering, or reduction, of the $120 billion in monthly asset purchases. This month, Fed chief Powell has to announce the first step to withdraw monetary stimulus by $15 billion.
Further, traders and investors today are looking toward the Federal Open Market Committee (FOMC) report. More precisely, the Fed should release its minutes from the meeting held early November. Back then, Fed policymakers said they agree to start unwinding the extraordinary monetary support.
To this end, heightened volatility could be expected in the US dollar as well as individual stocks across the board. This could also present an opportunity for traders to enter the markets.
What’s Happening in Cryptocurrency?
Bitcoin and the cryptocurrency market have been seeking direction this week. On Tuesday, the price of BTC and ETH jumped by 5% and 8%, respectively. The rally, however, could not be sustained in the early hours of Wednesday’s session.
Today, leading digital assets slipped from their highs set yesterday as the general market pulled back. Traders and investors in the emerging asset class are looking for fresh news to support the upside swing.
Still, many crypto participants are unfazed during this downturn. Not only that, but they are heading into the market to buy the dip.
Economic Data Coming Up Today (EST times)
On Wednesday, traders anticipate the FOMC meeting minutes slated for 02:00 pm. Before that, US GDP data for the third quarter will be released at 08:30 am. At the same time, initial jobless claims arrive.