Video

Kim Cramer Larsson
Areas covered in this webinar by Saxo Bank technical analyst Kim Cramer Larsson include EURUSD, USDJPY, GBPUSD, EURGBP, gold, silver, S&P 500, the Nasdaq, the Dax, the FTSE and the Dow Jones.
Squawk / 16 December 2015 at 19:05 GMT
Head of FX Strategy / Saxo Bank
Denmark
FOMC Announcement: The FOMC announced a 25 basis point rate hike to a new range of 0.25-0.50%, effectively ending the era of near-ZIRP and carrying out the first rate hike in over nine years. The FOMC vote was unanimous and the FOMC policy forecasts are unchanged versus Sep estimate (median estimate for 2016 at least), showing expected rate of 1.4% by end 2016 (far higher than market expectations). The initial read is somewhat hawkish on the failure to lower the dot plot more for 2016, even as Fed says pace will be gradual for further hikes. More to follow here with comments attached to this squawk. Stay tuned.
4y
John J Hardy John J Hardy
Note the extensive changes to the FOMC statement in December relative to October as the Fed takes pains to put the rate hike into perspective and provide new guidance.
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Juhani Huopainen Juhani Huopainen
EURUSD first down, then back up. I guess USD short-term speculative longs are taken out now. The USD is probably the big, unofficial metric that the Fed watches. Closer to 2015 range's lows - dovish guidance, closer to 2015 range's high - hawkish guidance. I guess traders are not willing to push the EURUSD toward the range low because of limited profit potential.
4y
John J Hardy John J Hardy
The language on the economy - employment, at least, looks very positive (as hawkish as the circumstance warrant) and the elimination of the "monitoring global economic and financial developments" despite China announcement and recent corporate bond turmoil looks relative hawkish. Do note that the Fed says that "it anticipates doing so [maintaining balance sheet at current levels by reinvesting maturing securities] until normalization of the level of the federal funds rate is well under way" So it will be a long time before we see the Fed discussing the shrinking of its balance sheet.
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Ole Hansen Ole Hansen
Gold remains range-bound with the dollar so far failing to give enough guidance. Key levels to look out for being 1058 and 1080. Press conference next
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fxtime fxtime
Juhani...I definately agree.
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John J Hardy John J Hardy
But perhaps 2016 Fed Funds future says it all: off 3.5 bps and middle of range of last few weeks = yawn. Let's see if Yellen press conference adds color.
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Peter Garnry Peter Garnry
Slightly positive reaction to FOMC guidance of 1.4% end of '16 despite higher than current market expectations - sign that Fed is more positive than market participants?
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Peter Garnry Peter Garnry
I was referring to S&P 500 futures btw
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Shazi Shazi
John what u think about euro usd now highr down
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bvlaerhoven bvlaerhoven
Muted market reaction shows FED has done a good job at massaging the consensus expectation. The last they wanted was for some Swiss style market movement creating havoc in the markets
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Juhani Huopainen Juhani Huopainen
The dot plot being unchanged, so the divergence between the market's view (Fed Funds futures) and the dot pot continues. Convergence - will the Fed want to pull market expectations higher, or is the market right, and the Fed will have to revise its expected rate path in 2016?
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fxtime fxtime
We need to see the underlying T notes 2yr / 5 yr settle for a real directional bias/expectation of markets for further (if any ) increases.....if these markets stall then expectations of economic growth will become the new ZIRP ! eg it flatlines at best.
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fxtime fxtime
bvlaerhoven I suspect a lot of traders wanted a swissy style movement LOL.
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bvlaerhoven bvlaerhoven
i for sure like the opportunity it provides
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Juhani Huopainen Juhani Huopainen
S&P500 is safe and sound - this hike was expected, and hikes in general are not bad, at least during the early part of the hiking cycle. From JPM's Guidebook https://www.jpmorganfunds.com/cm/Satellite?UserFriendlyURL=diguidetomarkets&pagename=jpmfVanityWrapper&vanity=diguidetomarkets#top
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Peter Garnry Peter Garnry
The expected rate increases in 2016 is not negative for equities - still most favourable asset class to be exposed to
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Peter Garnry Peter Garnry
Beginning 2017 the risk/reward FI and equities will change and then we can begin talking about whether investors should slowly scale back on equities.
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Juhani Huopainen Juhani Huopainen
Same feelings as Peter has.
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fxtime fxtime
Historically as you say the start of a rate rising cycle is bullish for equities....but strangely not always for the dollar index itself !
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Peter Garnry Peter Garnry
John...what to you read into EURUSD going higher during the press conference?
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John J Hardy John J Hardy
It's important that risk appetite is taking all of this in stride - I would think it eventually supports the USD versus EUR at minimum - though in the very short term this is not what we are getting in the immediate wake of the statement release as the Fed delivered what the market expected. 1.1000 in EURUSD looks like a psychological line in the sand, and if it can't hold into the close, some risk that we work to new local highs (1.1250 being the "final" capitulation level for keeping a medium term bearish outlook) - but note that the risk-on currencies and higher yielders are the bigger movers - NZDUSD back through 0.6800, AUDUSD rallying, EM currencies stronger, etc...
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Shazi Shazi
Maximum
Higer
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Shazi Shazi
John euro usd down side i think
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Peter Garnry Peter Garnry
Thanks John. S&P 500 futures moving higher...close to making new highs intraday
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Peter Garnry Peter Garnry
She just said in the Q&A that hiking the rate was also to increase the flexibility to respond to an eventual negative shock in the future...
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Peter Garnry Peter Garnry
S&P 500 futures making new highs intraday
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Peter Garnry Peter Garnry
She delivers an enough dovish views that equity markets are satisfied. Could be the start of a short-term rally toward year-end
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fxtime fxtime
Probably some short term profit taking tomorrow (?) but santas rally is as you say back.
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Peter Garnry Peter Garnry
She just basically said what Mads Koefoed, our Macro Strategist, has been saying for over a year, that this is a long expansion and could easily continue for a long time. Given where we are in the cycle, this could be the longest expansion since WWII in the US economy.
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John J Hardy John J Hardy
Specific question on junk bond turmoil and Third Avenue sees a very well prepared Yellen answer and I was looking for this subject to come up in the Q&A - USD picking up here as she attributes this to energy, bond fund selling and Third Avenue being a strange creature - she doesn't express a generalized concern here... key...
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Peter Garnry Peter Garnry
Exactly...was thinking the same thing when she mentioned Third Avenue. I think it is very comforting to see the Fed and the SEC beeing so proactive on this situation so it does not unfold badly. Tells me that the Fed has learned form the sub-prime ignorance in the years 2005-2007 or at least they acknowledge that any odd behaviour in markets can potentially lead to severe shocks down the road.
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John J Hardy John J Hardy
Now Yellen is talking upside risks and we have that Dec 2016 Fed Funds future pricing in another tick of hiking - this is beginning to look like the chips fall in the greenback's favour today if we stay here or higher in the major USD pairs - USDJPY pushing on 122.25, EURUSD 1.0900, GBPUSD 1.5000 - all of these important levels for follow through in sessions ahead.
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Shazi Shazi
John tomarrow euro usd higer down side
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Juhani Huopainen Juhani Huopainen
The most over-hyped event of the 2015, maybe after the previous ECB-meeting. Looking at daily candlecharts, one would not be able to note anything remarkable about the day.
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Juhani Huopainen Juhani Huopainen
Here's the Fed Funds futures "implied forecast" before and after the FOMC:

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