Opec is scrambling to save the production cut deal ahead of the oil cartel's November 30 meeting as oversupply once again stalks the global market. More to come within the hour....
Article / 22 September 2016 at 8:43 GMT

From the Floor: 'Hooray for central bank liquidity'

Your Next Trade

  • I think this reaction is going to fade – Hardy
  • Volatility will continue to chop back and forth and go higher – Hardy 
  • Oil markets are very much headline driven – Hansen
  • Asian equities ended in a sea of green – Liu
  • A 'dovish hike' would have been better for gold – Hansen
 By Clare MacCarthy

The Federal Reserve hit the pause button last night, flagging a rate hike in December instead, and the dollar tumbled against a broad range of currencies while stock and bond prices soared. Several dollar-sensitive commodities have logged decent gains, as has crude oil which is drawing further support from falling US stockpiles, Saxo Bank's strategy team members report in today's morning conference call.

While the "rather dovish Fed" inspired Asian equities to sail higher "in a sea of green", the US dollar was badly bruised, reports Edmund Liu from Saxo's Singapore trading hub. "There was a knee-jerk rally for the dollar to start with but USDJPY then continued its decline, hitting a low of 100.09 in the Asian session." The greenback did badly against a bunch of other currencies too, most notably the Australian and Canadian dollars as well as the Swiss franc.

All these movements, of course, were in response to the Federal Open Market Committee's decision to keep US interest rates on hold. "It was a major disappointment, though the vast majority [of market participants] didn't expect a hike," says John J Hardy, head of Saxo FX strategy. But although three of the FOMC board members had wanted to press ahead with a hike yesterday this doesn't mean that the board is split going forward because all three dissenters are scheduled to give up their voting status in the New Year, Hardy explains. 

USDJPY: Obvious focus on 100.00/99.50 zone now.
 Source: SaxoTraderGO

And where do we go from here? "Theoretically the narrative returns to – hooray for central bank liquidity, let's dive into risky assets, let's send equities back to all-time highs because the central banks will never, ever take away the punch bowl," Hardy quips. But that's just theory. What'll happen in practice will likely be quite different. "I think this reaction is going to fade, be it today, in a week, a few weeks or after the US election." 

The reason, Hardy says is that much of the recent volatility derived from a growing lack of confidence in central banks' ability to "move the needle" and while that sentiment is temporarily overshadowed by yesterday's FOMC "it'll come back to haunt markets". Volatility, he concludes will not return to near record lows but will continue to chop back and forth and go higher.

CLX6 resistance at $45.95 followed by $47.10:
Source: Bloomberg 

Oil markets, meanwhile, remain very much at the mercy of media headlines, reports Ole Hansen, Saxo's head of commodity strategy. "We've had three weeks in a row where inventories have dropped, two of them by more than expected," he says. WTI is still hovering around the $45/barrel level – which it's been doing now for six months. 

Now that the twin central bank meetings are out of the way attention is turning towards next week's oil producers' meeting in Algiers which might or might not result in a deal to cap or curb production. Ahead of that, for oil prices, expect more of the same.

Gold, meanwhile, failed to lift of strongly on the Bank of Japan and Federal Reserve policy decisions and the outlook now is for a prolonged period of consolidation, says Hansen. Indeed, a "dovish hike" would have been better for gold as it would have removed some of the uncertainty "but now we have to wait until December" he adds.

 "Not quite yet but December might be a jolly good idea." Photo: Federal Reserve

Clare MacCarthy is deputy editor at

Follow Saxo Squawk live throughout the day. Sign up here to keep abreast of all developments affecting your portfolios.

Editor’s note: From the Floor takes advantage of's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail