Omicron fears cast aside for the time being
The big shift in the market mood came from Powell's remarks yesterday, as he brushed aside risks of the new COVID-19 variant and kept the focus on monetary policy.
Powell called to retire the 'transitory' inflation narrative and advocated a quicker pace of tapering, reminding markets that they should be listening when the Fed talks.
Stocks still endured a torrid time amid rate hike fears but US futures are showing decent appetite so far today, with S&P 500 futures now up 1%.
While other risk trades were still vulnerable late on yesterday, things didn't go as badly as it should and that is providing a base for a slight turnaround today.
USD/JPY managed to stave off a daily close below the 9 November low, despite the low yesterday hitting 112.53 before Powell stepped in, and price is now back up to 113.57 with Treasury yields also edging higher so far on the day.
Elsewhere, oil is also recovering from a plunge below $65 yesterday to be up 3% now and trading just above $68 as we look towards the session ahead.
All in all, risk trades are looking like they are finding some base on the week as bargain hunters appear to be sweeping in after Powell helped to calm the mood a little.
Omicron headlines will continue to do the rounds in the days/weeks ahead, so just be wary of that. Ultimately, we will have to go where the data takes us.
But for now, the talking heads are the ones dictating sentiment and it is hard to find any more influential one than Powell.
