Market Unsure How To Trade FOMC
It's nothing if not choppy. Treasuries are selling off now (having initially oscillated) and the initial 'upgrade' of the economy juiced stocks but that has been faded. The DXY is surging higher as AUD, JPY, and EUR are losing the most ground against the USD. Commodities are feeling the lack-of-QE pain with Silver and Gold down quite hard. It seems equities remain the most confused - do we follow Treasuries (inflation/QE-off) and rally or do we follow USD/Commodity (QE-off) and drop? Based on pre-FOMC correlations, risk should be coming off and we note VIX gapped down under 15% and then back up to almost 16% now.
Commodities are taking the brunt of the Fed's less than dovish stance...
as are Treasuries, now 3-4bps higher post FOMC with the long-end underperforming (steepening).
Broadly speaking risk is off (as seen here by our CONTEXT proxy) but correlations are likely shifting to this new regime (though do we highlight the fact that the last day or two, risk sensitivity to the USD and Treasuries has become notably higher and less so for carry FX crosses specifically.
So - in summary (spot the odd one out) - Treasuries +4-5bps, Gold/Silver -1%, USD +0.4%, and ES unchanged!