In stocks, we had a relatively quiet day yesterday despite both the S&P 500 and DJIA making new all-time highs as banking stocks continued to dominate in the current environment, to finish up 0.08% and 0.31%, respectively while the NASDAQ-100 finished lower by 0.41% after being dragged lower by the healthcare sector. Asian indices also traded mixed with the Nikkei 225 the key leader, gaining 1.1%.
In FX, the FOMC minutes of their last meeting made sure to keep the USD the crowned leader in terms of strength as we see the USD continue to dominate across the board. The EURSD headed closer to the 1.0460, 13-year low, while the USDJPY made 8 month highs and the USDCHF continues north of parity to close the gap on this year’s high at 1.0250.
In commodities, we saw crude stay unchanged but near recent highs as OPEC members continue to vocally support efforts to curb output while the US announces that it might fill the gap of any output freeze by OPEC. Gold lost over $30 yesterday as bears made light work of the $1200 support level to finish the day at $1185 after the precious metal was dumped as risk on sentiment over the US rate hike filters through other sectors.
The minutes, which are a summary of the members concerns and reasoning behind last month decision to not lift rates, also showed the general view of the members, which much to the USD`s delight, showed that most members were calling for a rate hike sooner rather than later, with some pointing out that a failure to act soon will result in a rapid over heating of the economy as the job sector swells, which would then require an even more aggressive lift off strategy the longer they took. Markets took this as very positive, with the probability of Fed rate hike in December at 100% as we see investors adjust their portfolios, buying USD and dumpling risk haven assets.
With the actual decision getting closer day by day, markets will have their eyes wide open for any signs of change to the expected probability of a rate lift off. All news items and announcements out of the US will be scrutinized, good news, affirming the lift off, will see the USD stand tall as it gains further while any signs that the probability is in doubt, will see swift sell offs in the USD as markets react quickly, to exit heavy long USD positions, in overbought territories.