FOMC Minutes React: Calibration means Pivot can’t be too far, Pepsico impresses, Oil tumbles, Gold pares losses, Crypto hovers around $19k PlatoBlockchain Data Intelligence. Vertical Search. Ai.

FOMC Minutes React: Calibration means Pivot can’t be too far, Pepsico impresses, Oil tumbles, Gold pares losses, Crypto hovers around $19k

Time Stamp: October 12, 2022 2:52 PM

US stocks got a little boost after the FOMC minutes provided a sprinkle of dovish hints. The word of the week is ‘calibrate’. Officials are already talking about a calibration to the pace of tightening which means we are getting closer to that Fed pivot.

Earlier, Pepsico quarterly results provided some optimism that this earnings season wasn’t going to be all doom and gloom.  Pepsi delivered a strong earnings beat and raised their guidance. 

Minutes

The Fed Minutes showed tightening will continue even as the labor market slows.  The key takeaway from the minutes was that several participants noted that it would be important to calibrate the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on the economic outlook. We’ve heard from Fed’s Daly and Brainard and they have voiced support for remaining data-dependent when it comes to future hikes and right now it looks the data is about to get ugly.  It will be hard for the Fed to remain aggressive with tightening as the economic deteriorates quickly.

The Fed is giving us subtle dovish hints here and that is good news for risky assets.  Officials saw slowing the pace of hiking at some point and that could easily happen after the November FOMC meeting.  Investors should continue to expect a 75bp rate hike at the November 2nd FOMC decision, but a downshift in December would be likely if the global growth outlook continues to deteriorate and if the US economy softens.  

Oil

Crude prices tumbled after reports that Russia was willing to sell oil at a discount.  Russian seaborne oil deliveries are about to have a price cap put in place and it looks like Russia is getting desperate for revenues.  Last month, Russia was threatening they would stop selling oil to countries that would agree to use a price cap, but now it seems like that was just a bluff. 

Oil was heavy all day as today’s news cycle was rather bleak for the crude demand outlook. A hot US PPI report suggests inflation is proving to be sticky and will keep the risk elevated that the Fed will send the economy into a recession.  The German government anticipates a recession is coming next year as inflation runs wild alongside the global energy crisis.  China is also having trouble with COVID again as Shanghai and Shenzhen see infections rise after the holiday. 

Selling pressure on WTI crude has been strong all week and prices could continue to slide towards the $85 region.  The oil market is still tight despite significant downgrades to the outlook by OPEC has put a tentative end to calls that oil was easily heading towards the $100 level. 

Post Fed-minutes all risky assets, including oil pared losses after several policy makers signaled they are getting ready to calibrate their pace of tightening.

Gold

Gold remains in choppy waters ahead of a pivotal inflation report that could raise the risk of even more Fed tightening.  The latest producer prices report showed inflation is not easing at all and that has some traders expecting more pain to hit the bond market, which will drive the dollar to new heights. 

Gold won’t do much of anything until the inflation report and that means prices should bounce between the $1670 and $1690 levels.

Gold prices popped after the FOMC minutes signaled some policymakers are getting ready to calibrate their tightening path. 

Crypto

Bitcoin continues to hover around the $19,000 level as traders await tomorrow’s inflation report that could make or break risk appetite. Crypto news today focused on a Congressional probe on miners and the strain they are putting on the state’s power grid.

Bitcoin could breakout after the inflation report as Wall Street will have a better idea if the Fed needs to maintain an aggressive tightening stance beyond the November FOMC meeting. If inflation stays hot, Bitcoin could be vulnerable to test last month’s lows just ahead of the $18,000 level.  

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies.

Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news.

Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal.

Ed holds a BA in Economics from Rutgers University.

Ed Moya

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