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US Market Update – Fed eases taper tantrum fears

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Yields pull back on Fed speak

A relatively calm session on Wednesday, with Europe ending the day a little mixed and US indices edging higher, led by tech.

There’s a lot of US political noise now as far as the markets are concerned. The shocking events on Capitol Hill and now the likely prospect of an historic second impeachment for President Trump is front and centre of the news flow but it’s having minimal impact on the markets.

Investors are far more concerned with the incoming administration and what that means for stimulus prospects and inflation.

Soothing words from Fed policy makers over the last 48 hours have helped take the edge off the yield moves which could provide some relief. I guess we’ll see in the coming days just how much.

Should we see the 10-year drop back below 1%, it would suggest investors are far more at ease with the Democrats stimulus plans and could be bullish for stock markets, no longer held back by the prospect of premature Fed tightening.

The political distraction will likely remain ahead of the inauguration next week as security is ramped up.

Any hopes of an impeachment trial in the Senate over the next week have been quashed by Majority Leader Mitch McConnell who dismissed the idea of reconvening for a trial before Trump leaves office.

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Craig Erlam

Craig Erlam

Former 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.
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