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  • Google finance-related search interest in 'Evergrande' has almost overtaken 'Covid'. 'Taper' doesn't even register on the scale https://t.co/P6H9sHFVIB
  • Gold prices gain as potential systemic risks out of China's Evergrande Group roil broader markets. Meanwhile, iron ore is ticking higher after a big drop on Monday as China steps up steelmaking curbs. Get your market update from @FxWestwater here:https://t.co/l4kAWDJ2wm https://t.co/b9m5ADIqqb
  • Gold remains higher despite positive Evergrande news out of China. Meanwhile, copper bulls are pushing prices upward as the potential for a housing crisis in China ebbs. Get your market update from @FxWestwater here:https://t.co/TK3MNntBdA https://t.co/14UKjR4w6M
  • GBP/USD has flattened overnight after its strongest rally in a month on Thursday. The British currency has been under pressure recently as an energy crisis has caused a number of gas providers to go bankrupt. Get your market update from @HathornSabin here:https://t.co/3D8s2eIVWv https://t.co/JDGNwKYyOn
  • Japanese candlesticks are a popular charting technique used by many traders, and the shooting star candle is no exception. Learn about the shooting star candlestick and how to trade it here: https://t.co/mfwJ0sIauS https://t.co/JIT5it2HAt
  • Gold could suffer further near-term losses due to rising U.S. Treasury yields and a weak technical picture for price action. Get your weekly gold forecast from @DColmanFX here: https://t.co/g9QvH3L4It https://t.co/Vz98E0Bl9U
  • Gold has been trending lower after failing to clear resistance in the $1835 area earlier this month. Get your $XAUUSD market update from @DColmanFX here:https://t.co/3hm1g3BHgf https://t.co/MdTQKEBCBx
  • Key break here in the 10-year #Treasury yield as it rises to the highest since late June Took out 1.4230 resistance, and the 100-day SMA Eyes now on the 38.2% Fib extension at 1.4775 Also potential falling resistance from March https://t.co/4cI6l210ui
  • The move in rates after this week’s FOMC has continued and the 10 year yield has pushed up to a fresh two-month-high. Get your market update from @JStanleyFX here:https://t.co/CRWhuZ3sxD https://t.co/svHHqN2Zz8
  • S&P 500 contending with its proverbial ‘line in the sand’ as bulls and bears battle for directional control. How we close/trade around the 50-day moving average could serve as a noteworthy bellwether for risk trends headed into next week. I remain cautious below ~4,480. $SPX $ES https://t.co/qogkjs1Sx2
Video: Global Monetary Policy is Turning, Will the Markets?

Video: Global Monetary Policy is Turning, Will the Markets?

John Kicklighter, Chief Strategist

Talking Points:

  • While the Federal Reserve started tapering 3 years ago, global monetary policy is still at record highs in 2016
  • Yet, the effectiveness of stimulus on growth and markets is fading; and the pace of its expansion waning
  • The ECB, BoJ and BoE are the current champions of easing; but lost traction on their efforts may signal a tide change

Sign up for the FOMC rate decision event and see what other live coverage is scheduled to cover key event risk for the FX and capital markets on the DailyFX Webinar Calendar.

Monetary policy has proven one of the most persistent fundamental influences in the global financial markets through this bullish cycle, but is the tide changing? Central bank accommodation has offered a stable platform for recovery from the Great Financial Crisis, but its limitations have grown increasingly apparent in recent years as central banks have continued to employ crisis-era tools to simply lackluster growth. And, the results have grown increasingly ineffectual. The upgrades needed to effect similar economic accelerations to previous years grow larger and larger while the practical capacities grow ever more apparent.

The risks of a market discovering that the central banks are losing traction and/or are starting to capitulate in their efforts is that much of speculative drive we seen in this period of buoyancy was founded on the distortion created by this collective group. Economic activity has plateaued, revenues have struggled with GDP and low yields were the price of admission for this temporary curb on volatility. If confidence in a steady market were to evaporate, the environment would offer little appeal to maintain - much less further extend - the extreme exposure held on the market's balance sheet. The gap between the cost to participate in the market (the S&P 500 is a good benchmark) and the basic risk-reward balance (10 year yields over global volatility) is worrying.

It may seem that the end to stimulus is far off into the future, but the turning tide is likely far closer than most suspect. The Fed has already tapered its QE, the SNB has seen its efforts broken by the markets and the PBoC is attempting to balance a delicate economic act. Yet, even the world's most prominent doves are facing limitations. The Bank of Japan (BoJ) has unofficially capitulated form their ever-expanding effort by changing their target to the 10-year JGB yield. From the Bank of England (BoE), the newness of the stimulus is easily outstripped by its limited size. Even the European Central Bank's (ECB) recent extension draws practical issues and a clear deceleration of expansion. Add to failing light of the ever expanding stimulus era a rise in dubiety as to its effectiveness, and we are reminded that manufactured optimism is riding on borrowed time.

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Video: Global Monetary Policy is Turning, Will the Markets?Video: Global Monetary Policy is Turning, Will the Markets?Video: Global Monetary Policy is Turning, Will the Markets?

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