The FOMC meeting minutes left a few wondering about the strength of the US recovery, but rates remain a focal point, with comments continuing that they may need to be raised sooner to help ward off a possible instability in the financial system. Tapering was another point mentioned, and it now looks to be a part of any rate rise plans. Despite this, the USD was far from confident with losses to the JPY and CHF for the week. The EUR shrugged off dollar demand with a mini jump after ECB comments around inflation and its inflation target. Inflation is not seen where they want to be, and the 2% rate has now become a target, not a ceiling. Despite this, comments said it was not the same as the US target approach?
Tapering, rates, and delta numbers looked to have driven a mini sell-off in stocks late last week. The DAX reacted severely to the ECB comments, and selling wasn’t European based. Asian indexes had a horror run on Thursday as the Nikkei, and Hang Seng fell sharply. Losses on the Nikkei short-lived as it bounced back with vigor on Friday. It wasn’t all doom and gloom, the Nasdaq and S&P500 both hit new all-time highs last week.
Gold saw a solid week, with demand coming back into the metal off the back of last week's worries. Price trading back up to the 1818 area. Oil saw a wild week of trade with a move back up to 77 before tumbling back down to 70. Price recovered late week but had to deal with a few influences from indecision from OPEC members, which is seen as resolving in the near future.
This week we have two central bank meetings, NBNZ and the BOC. Will there be any updates from the BOC after their solid jobs data? The focus will be on US CPI and retail sales under the current climate. Chinese GDP will be another focus after their last 18% gain. Friday’s recovery in equities, was the reaction overblown? Is the market starting to price in rate rates and tapering? Could we see the Nasdaq and S&P500 make new moves at breaking last week's records?
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