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The Fed meeting has revealed their collective thoughts and we mark-to-market the outcome relative to expectations and positioning.

Clearly, the moves suggest it was taken dovish relative to how markets were positioned, although the fact three Fed members are calling for hikes next year and one for two hikes is interesting. I had been calling for no move in the median dot for 2023 and that came to fruition despite some houses saying we would see not just one lift, but even two hikes being pencilled in for 2023. This proved to be a market mover as I discuss in the video.

The Fed are reactionary, they want evidence before they alter the pace of asset purchases, and the fact is if inflation moves higher and is not transitory, then they will to taper its QE program later this year and start to make noises that they will hike. This is the new world we live in.

(Eurodollar interest rate futures strip)

Eurodollar Interest Rate Futures

If I look at the Eurodollar interest rate markets, we’ve seen good buying into the 2025 contracts, showing rate hikes have been priced out through this period. However, past that yields on contracts into 2027 contracts move aggressively higher. The message: lower for longer, but then it’s showtime and the Fed push harder on the breaks. Of course, there is much that can happen between now and 2027, but this is the message we see in the rates market and I am not sure how bullish that is when you’re taking performance from the future, then being forced to act more intently. For now, though, this was a market-friendly meeting and I address the moves in the video.

This article is brought to you in association with Pepperstone. All opinions expressed in this article are from the author and do not necessarily represent the opinions of The Armchair Trader.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Chris Weston

Chris Weston

Chris Weston is Pepperstone’s Head of Research and holds over 20 years of experience trading and analysing markets. A highly-respected markets expert, Chris has worked at IG, Merrill Lynch, Credit Suisse and Morgan Stanley, covering research as well as sales and trading roles. His extensive exposure to the FX, equities and fixed income markets puts him in a unique position to provide inspiring insights, research, ideas and risk-management strategies that support every step of your trading journey. Based in Australia, Chris is a well-known global media figure, regularly appearing on Bloomberg, CNBC, Channel News Asia and Sky News

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