DBD Strategy Daily - Dovish or hawkish Fed?
Was the Fed dovish or hawkish? We do not trust words much, especially in this world where every one relies on "communication". What do prices tell us? Bonds were clearly dovish yesterday, as we expected. Equities fell lightly. Is this a dovish or a hawkish reaction? We do not know... What we can see is that last week's bullish gaps in the US were closed yesterday in the very last minutes of the trading session. The Dow Jones Industrials and Transportation thus reintegrated their previous highs. Yet, we have to give a chance to US indices to bounce after closing those gaps. The movement could have been driven by algorithms and prove to be a trap. It is a small probability, but it does exist. Bond spreads and the banking sector seem to follow on the Bond market reaction, flattening curves weighing on banking performance. It should be tough for European Equities to keep on their recent bullish path...
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