Global selloff in equities resumes

The FTSE has opened down over 1% lower as the global sell off it equities resumes following hints from the Fed that interest rate could rise faster than expected.

The FTSE has opened down over 1% lower as the global sell off it equities resumes following hints from the Fed that interest rate could rise faster than expected. 

The keenly awaited FOMC minutes released last night, provided the market with two key points. Firstly, thanks to global growth, the expected impact of the US tax bill and supportive financials markets, the Fed had upped its growth expectations for the US. 

This would mean that a faster pace of rate rises could be on the cards. However, the second interesting point is that some Fed member still believe that inflation could undershoot the 2% target. The mixed message saw a whipsaw reaction from the market. 

The Dow initially jumped higher and the dollar lower as market focused on the potentially over undershooting inflation. However, the bond market quickly grabbed onto the fact that the Fed could tighten monetary policy faster than previously anticipated. 

Bond yields shot to a fresh 4 year high of 2.94% sending jitters through the stocks markets, which saw the Dow reverse some 300 points to end 166 points lower and the dollar bounce higher breaking through the important psychological level of 90.00. 

Barclays rallies 5% despite £1.9 billion net loss  

Barclays brought some positivity to an otherwise sea of red on the FTSE. The bank reported a 10% increase in pre-tax profit, however its bottom line sank into the red following a a one off charge relating to US tax reform and a big hit after selling its African operation. 

Net loss totalled £1.9 billion, down from a net profit of $1.6 billion in 2016. Despite the loss Barclays share price was trading over 5% higher, as investors focused on the banks intention to return to paying dividends and returning capital through share buyback in the future. 

ECB minutes to drive EUR/USD back towards $1.24? 

Today the minutes from ECB will be in focus. The ECB will be releasing minutes at 12:30GMT from the January meeting. If we think back to the minutes from the December meeting, the ECB surprised the markets by a more hawkish tone. 

The December minutes indicated that the ECB could relook at its forward guidance in early 2018 which encourage market participants to believe a rate rise could be on the cards sooner rather than later. Today investors will be watching closely to see if the ECB policy makers have focused more closely on this potential policy shift. 

If this is the case again then a more hawkish ECB could lead to the EUR/USD strengthening and trimming some of its recent losses. Going into the release the EUR/USD remains pressured by a stronger dollar sub $1.23. 

A more hawkish tone could see the pair make a fresh attempt to break above $1.23 before moving higher to resistance in the region of $1.2335 before targeting $1.24. On the downside a less hawkish ECB could set EUR/USD towards a target of $1.22.

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