The market reaction to the FOMC minutes has been a classic hawkish response. Talk about the balance sheet shrinking and a high comfort level with hiking soon have pushed odds of a March hike to 80%.

The dollar has rallied, yields are up and stocks are down in the aftermath.

I'm always wary of the FOMC minutes because of the long history of markets overeacting to a snap-shot in time and headlines filtered through newswires. It's very difficult to capture the nuance of the minutes and the Fed can send mixed messages.

I think the bond market might offer the clearest take. US 2-year yields are only up fractionally since the release while 10s are up less than 1 bps.

FX is likely reacting to bonds and stocks with risk aversion hitting equities, particularly tech. Higher rates aren't good for tech in particular but high-flying tech has been slowly keeling over for awhile. Just now the ARKK ETF from Cathie Wood broke through the lows of 2021.


In FX, the Australian dollar is down to 0.7235 from 0.7265.