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USD pares GDP gains on reports Powell set to be next Fed chair

Summary:

  • Reports that Powell set to be next Fed chair weigh on USD and support Gold
  • Moves reversed earlier market action after US GDP beat forecasts
  • Spanish stocks falls as Catalonia declare independence
  • Oil moves up to highest level of the year
  • Buffet calls Bitcoin "a real bubble"

 Its been a fairly eventful day for USD and Gold traders with the markets reversing earlier moves after unconfirmed reports stating the next Fed chair. The race is certainly hotting up with reports doing the rounds that Trump is leaning towards nominating Jerome Powell. This is seen as a fairly dovish move with a nomination for Powell meaning that Taylor would not be appointed, with Taylor seen by many as far more hawkish than the current stance. 

A gauge of the markets sensitivity to these rumours can be made by comparing the reaction in assets such as Gold following their publication to that seen after economic releases. It is quite telling that there was a substantially bigger move on the Powell talk than there was after the release of US GDP. The world’s largest economy continues to grow at an impressive pace with the US advance GDP Q/Q for the 3rd quarter coming in at 3.0%.

The Catalan independence saga has had a potentially major twist this afternoon with the Catalan parliament voting strongly in favour of independence. Deputies in the regional assembly backed the motion for secession by 70 to 10 in what is a momentous decision and represents a major escalation of the biggest political crisis in Spain since the 1970s. Spanish stocks (SPA35) have fallen by almost 2% today and the prior support level at 10090 may be keenly watched heading into the weekend. 

Oil prices have been on the rise as of late, however this week’s developments seem to be equivocal in terms of the commodity’s future. First and foremost, the regional Kurdish authorities declared on Wednesday to "freeze" the independence referendum’s outcome in order to defuse tensions between Kurdistan and the government in Baghdad. Both Oil.WTI and Brent Oil have hit their highest levels of the year this afternoon with the former moving above the $53 handle and the latter trading close to $60. 

It’s been a relatively muted session in the crypto space with Bitcoin trading lower by a little more than 1% heading into the European close. Bitcoin’s appeal could have been undermined following some remarks voiced by the iconic investor Warren Buffet who didn’t beat around the bush that he was not a Bitcoin supporter. He called Bitcoin ’a real bubble’ which cannot be valued because it’s not a value-producing asset

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