â– U.S. elections outcome & Fed rate hike outlook continue to weigh on markets
■S&P 500 secures 9-day losing streak, the longest since Dec’ 80’
â– Haven-seekers set USD/JPY to 1.55% weekly decline, amid U.S. woes
â– GBP strengthens on U.K. High Court ruling, hawkish BoE
â– Modest gains for gold suggest market not in panic, yet
Concerns from a forthcoming monetary tightening were boosted this week with growing uncertainty from the outcome of next week’s U.S. elections. The S&P 500 complimented previous declines with five consecutive negative daily sessions, marking the longest losing streak for the index since December 1980. The CBOE’s VIX index, similarly, has now gone up to 22.51 points, its highest since June’s Brexit vote.
News items concerning U.S. monetary policy were certainly present this week, hosing both the FOMC’s rate announcement, as well as October’s nonfarm figure. It’s worth noting, however, that both acted largely as expected. The Fed’s sterile announcement, namely, not being followed by a press conference, had expectations for a rate hike standing at about 16%. The language used by the Fed, on the other hand, helped entrench confidence that December would be it, with the Fed saying that the case for a rate hike has continued to strengthen and that it decided to wait for the time being for some further evidence. With that out the way, Friday’s Nonfarm figure, seeing a modest 161K jobs added to the U.S. economy was enough to aid market expectations for a Dec rate hike increase to 78%.
U.S. uncertainty also translated to a weaker USD, with EUR/USD rising 1.4% for the week, ending at 1.1141. It’s worth noting, in this aspect, that the Fed’s Wednesday rate announcement was interpreted as a hawkish signal at the FX market, with the currency pair losing about 0.2% after it, evidently, to no weekly avail. U.S. troubles aided the JPY serve as the reserve currency of sorts, with USD/JPY losing 1.55% during the week, ending it at a level of 103.12.
