US Open – Who Needs Yield Curve Control?

Central Banks Satisfied With Current Stance

Stock markets in the red across the board on Thursday, as sentiment softens a little on the back of the Fed minutes.

With the S&P 500 and Nasdaq both back in record territory, we may also be seeing a little profit taking as the minutes themselves weren’t exactly that much of a blow. Policy makers don’t seem to be entertaining the idea of yield curve control at the moment, with the policy offering only modest benefits, while offering the view that the pandemic is both still weighing heavily on activity and poses considerable risk to the outlook.

All considered, even with the tweak to the language on forward guidance, I don’t think there’s much to be concerned about. They’re not tightening any time soon, the chances are we’re facing the status quo for some time. It seems the minutes were just an excuse to take a little profit off the table as a number of people question these lofty valuations, under the circumstances.

There may have been a giant leap forward since March for many trends that had been evolving gradually anyway in the years prior but many are questioning whether the size moves we’re seeing are justified. Eyebrows are always going to be raised when a company becomes the first to reach a $2 trillion valuation in the midst of a pandemic and two years after becoming the first to reach $1 trillion.

ECB minutes get muted reaction from markets

Not a huge amount to take away from the ECB minutes, with the central bank acknowledging the dependence of markets on the continuation of policy support, while noting that the markets aren’t fully backed by the data. They also stressed that the PEPP program, while currently envisaged to be used in full, was a ceiling rather than a target and that it must remain flexible. None of this is a game changer, obviously, and the tight range in EURUSD in the ten minutes after the release perfectly highlights this.

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam