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Today I’m going to be talking regarding this in reference to a lot of of a knee-jerk reaction from markets towards economic information releases. Even once you anticipate and expect sure releases to provide a volatile reaction, however does one recognize that aspect markets can take after?
One of the a lot of common plays within the rule book is “buying the rumor, selling the fact”. We’ve all seen this happen lots of times in markets however what precisely will that mean?
I’ll use the Fed’s most recent call as a good example of this. As we have a tendency to entered december, markets were evaluation in an exceedingly lesser probability of the Fed hiking rates in its most recent meeting; falling from ~80% to ~65% ahead of the FOMC meeting.
It was the second-best activity major currency despite the very fact that markets were anticipating the Fed to show more peaceful in their comment as they deliver yet one more rate hike.
Markets were making ready for a “buy the rumor, sell the fact” scenario because they bought the dollar up in anticipation of another rate hike however are trying ready to sell the dollar as the Fed turned a lot of peaceful.
However, there was a twist within the tale as we have a tendency to entered the Fed decision week. The dollar came beneath selling pressure as markets then changed their focus and began pricing in an exceedingly rather dovish Fed to follow.
So, this was some information regarding the market.