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Fed Meeting & NFP...

Video Script

Hi everyone, hope you’re all doing great and ready for another week ahead in markets. You know it’s going to be a big one when there’s a Fed meeting and non-farm payrolls in the same week. We even have the monetary policy decisions of the Reserve Bank of Australia and Bank of England to contend with too. Lots to discuss - stay right there.


Right let me talk a little about the market action going into this week. The first thing to mention is US indices are back at record highs – the Dow and S&P 500. So, we can say sentiment has been fully healed since the five percent pullback. That’s demonstrated most clearly by Tesla reaching a one trillion-dollar market cap for the first time. Clearly, it’s earnings season and results have been generally well-received by investors. Perhaps one conclusion we can reach is that it’s not the fortune 500 companies that are feeling the strain from the ongoing supply-chain constraints.


Forex markets have turned sideways in the last week or so with the US dollar recouping losses from the prior fortnight- which I think is in anticipation of the likely announcement of tapering from the Fed this week. The idea that oil will be needed to replace shortages in coal and other energy commodities continues to push up Brent and WTI contracts. Gold is bumping up against its 200-day moving average.


And while I’m at it, can I just ask that if you’re enjoying the video, please feel free to show some appreciation and gives us a thumbs up! It really helps us spread the word about these videos


Now last but not least, let’s have a look at the several economic calendar highlights. So in chronological order there is the RBA, which is expected to keep policy unchanged. In October they reduced asset purchases but extended the length of the program, so it was seen as a ‘dovish taper’. The RBA isn’t planning a rate hike until “actual inflation is sustainably within the 2 to 3% target range”, a condition unlikely to be met before 2024. Moving on to the Bank of England, financial markets have priced in a UK rate hike this week so the failure to do so would be a surprise.


The Federal Reserve is of course the big one. It seems market participants are ready for tapering to officially begin this month. A delay to December would be a dovish surprise. I think you know this by now because I talk about it every week – but tapering is a policy of gradually reducing quantitative easing – that’s QE - bond purchases. The average guess on Wall Street seems to be for a taper of $15 billion a month, which roughly carries the tapering through all of next year.


Finally, there is the October non-farm payrolls report on Friday. It comes after a big miss for the September figures, which were brushed off with the logic that one miss is unlikely to stop the Fed from tapering. Now if we see another very weak US jobs number, there is a risk to markets because investors might start to worry the Fed is making a policy mistake by tapering just as the economy slows.


Right thanks everyone, good luck trading this week and make sure to click on subscribe so you don’t miss the next episode of the week ahead.

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