A strong finish to a volatile year?

 A strong finish to a volatile year?

A strong finish to a volatile year?

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Everything is pointing to a strong finish to the year. Futures are trading in the green, South African Rand (ZAR) has a positive pullback against the greenback currently trading at 14.55 with a lower dip to 14.40. Gold has also recovered from previous lows earlier in the month having traded $1750 and now currently $1782. Crude Oil is colling of from its rally trading $82.50. Cryptos however are the shining stars of the risk on sentiment in markets with Bitcoin (BTC) and Ethereum (ETH) trading at record highs. The USD experiencing a wobble however it is trading at the year’s (2021) record lows against the Euro currently at Eur 1.1645. As the earnings season is in full momentum, the Nasdaq 100 has been trending higher and trading above the 100-day moving average at 15,379. Volatility index is back to lower levels at 15.81 gaining 2.06% for the day. Everything points to a healthy and stable state of markets. However, could this be the calm before the storm?

With inflation proving to be persistent rather than transitory will global central banks react in time to curb it? This could be the undoing to markets continuing their move in the green. Persistent inflationary pressures will move central banks such as the US Fed to hike interest rates to cool inflation. The Bank Of England (BoE) has long signaled of an imminent rate hike and it is forecast that the BoE will have one of the fastest tightening cycles in recent time. The GBP has moved stronger on BoE Hawkish comments, in particular the GBPJPY currency pair. The bullish move of GBP against the JPY highlights the interest rate differential of the two money markets as the BoE readies to hike rates while they remain lower in Japan.

The inflation narrative seems to be what will transition to the corrective narrative across the financial markets. This correction will certainly provide and opportunity for investors and traders to buy into the dip. BTC has proved to be cyclical in this manner, buy the dip and possibly sell the bounce, or keep holding the crypto asset as it has become a store of value of some sort.

As supply chain constraints begin to ease, this could be a cooling effect to energies (Crude Oil and Gas prices). Demand pressures however remain elevated till these constraints are resolve which does not seem imminent though price pull backs will be experienced providing opportunities to enter the trend.

The USD will attempt a bounce back which is likely to be kicked off by better than expected weekly Jobless Claims data. Thursday’s (21 Oct) US weekly Jobless data consensus was 300k and actual was 290k indicating an uptick in US firms hiring or rather a reduction in jobless claims. Should this trend continue in the coming weeks, the next US Non-Farm- Payrolls data will likely be forecast bullish. With US Fed’s Quarles commenting that the asset program taper test being met and that the US Fed is In Fact not Behind the interest rate hiking curve. These comments could be seen somewhat bullish, potentially providing that boost to the USD bounce back in the near term.

Disclaimer: the publication of analysis is a marketing communication and does not constitute investment advice or research. Its content represents the general views of our experts and does not consider individual readers’ personal circumstances, investment experience or current financial situation. Analysis is not prepared in accordance with legal requirements promoting independent investment research and Exness is not subject to any prohibition on dealing before the release of analysis. Readers should consider the possibility that they might incur losses. Exness is not liable for any losses incurred due to the use of analysis.

Terence Hove

Terence Hove, a Financial Markets Analyst with multi-asset brokerage firm Exness completed his BBusSci: Economics at Monash University. With over 8 year experience within financial service his expertise is well developed in financial markets analytics and trading. Exness is an industry leader that provides reliable online trading in financial markets. Exness offers professional services on the above-mentioned assets, please follow the link to learn more on the offering exness.com

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