Asia Session Macro: Asset Prices Paint A Scathing Picture Of Fed Communication

Oil. Finding the elusive trend
 
Although there has been a minor bounce back in risk sentiment to start the Asia session, oil markets remain in low gear as discovering the elusive near-term trend is obfuscated by OPEC's price put as traders remain mired on COVID haze. I still think oil cuts both ways this week, but the US dollar will provide the opening lead. (FX -Oil)
 
Markets
 
Asset prices paint a scathing picture of Fed communication since the FOMC's Sept. 16 meeting. Lower US stocks, plummeting base, and precious metal prices set against USD strength point to some disappointment that the Committee did not follow up its new AIT framework with a more significant commitment to asset purchases or, at the very least, spelling out what 2% average inflation means.
 
 
But to the Fed's credit, highlighting the need for fiscal stimulus is a positive but with prospects receding fast ahead of the US presidential election, as the US political debate focuses on the Supreme Court, let us hope the Feds shrill cries do not fall on deaf ears.
 
Yuan
 
A slightly more risk-friendly Yuan rate-fixing today sees USDCNH reverting to the mean, which is viewed slightly favorable across the currency market as the EURUSD ticks higher. But selling the dollar in this environment, you could be a braver fool than me.
 
Despite the ongoing higher-than-expected fixing and USD weakness till late, the CNY continues to strengthen against the CFETS basket, which is likely more of an issue for the PBoC than strengthening against the dollar straight up. I believe that heading into the US election, the CNH will continue to face headwinds to appreciate. Having batted for lower USDCNH since June, I am reluctant to step back in until, at least, after the first US presidential debate to gloss over the polling numbers.
 
Gold
 
Pros do not like to fight a shift in the narrative, so with the Fed's Evans adjusting the AIT rules of engagement, suggesting US interest rates to move higher before inflation averages 2%. And no other push back from subsequent Fed members. One of the gold market's primary pillars has weakened. With the USD re-establishing itself as the go-to safe harbor in stormy seas, gold is falling out of favor. If the stock market falls further, the highly leveraged gold positions could be the first to buckle again to cover broader drawdowns.