A week dominated by Central Bank decision making and commentary, ended on a negative note Friday. The Federal Reserve declined to renew the emergency SLR Capital requirement ratios for the banks. US Equity markets crashed on the news. The failure of the Federal Reserve to renew the emergency SLR requirements has been taken as a signal to Banks and the markets. The era of gross and expansive liquidity may be coming to an end and this is the signal the markets fear. US Bond yields are the truth-teller and they spiked again Friday, trading up to 1.75%, in the US 10 year Bond.
The coming week will be huge and dominated by global PMI data, US GDP and Central Bank commentary. The Federal Reserve Chairman, Jerome Powell, makes an appearance before the US Congress and this may well impact markets. Powell’s considered and ‘woke’ appearance before the US Press, following the two day FOMC meeting, hints at a ‘nothing-burger’. The ECB and European Council also meet in the coming week, but expect a deeply sanitised version of the truth, for the general publics consumption.
The spike in US Bond Yields has temporarily supported the US Dollar, with the EUR trading 1.1900, while the GBP has retreated back to 1.3865. The disruption to the vaccine roll-out and extended lock-downs in Europe, will severely impact economic performance and this will be reflected in the ongoing data releases. The US is under extreme pressure, as the Democrat dominated Congress and Presidency, look to expand the deficit/debt crises to almost unredeemable levels.