Fed or dead

17 September, 2015

Today’s Fed meeting seems like it has been the one that has been the longest time coming. A couple of months ago, there was almost a universal thinking that we would see rates increased at the meeting. Then came the wobbles that emanated from China, together with the lower oil price. We’ve see inflation data over that time generally fall to the soft side of expectations and market based measures of inflation expectations fall to levels last seen in the early part of this year. So for the first time in a long time, this is the first meeting where investors are really going to be starting at the rate on the screen to see if it does change. Surveys of bank economists are pretty evenly split on the outcome, whilst interest rate futures are suggesting a 33% probability of a change in rates. Whilst on balance a rate increase would be dollar positive, it is the statement that will determine the sustainability of this, together with the trajectory of forecasts published by the Fed today. Even on a no change outcome, we’re going to see volatility, both on the statement and the subsequent new conference given by Yellen.

Before the Fed decision arrives we have retail sales data in the UK, together with housing starts in the US and the usual weekly claims data. Looking across FX, the biggest standout is the recovery in emerging market currencies, where over the past week we’ve seen the Russian Rouble up nearly 4%, and the South African rand up 2%. The Aussie has also managed a decent recovery, up for the past seven sessions and to levels last seen vs. the USD since late August. On balance, we see the Fed on hold. Initially this is likely to give emerging market currencies a further boost, but if Yellen proves to be hawkish, then this move could prove to be transitory.


Source link  
Divergence Between Fed and BoJ

The March FOMC meeting will be held for two consecutive days from today. The interest rate decision will be announced at 18:00 GMT on Wednesday 15th March...

Market Volatility Expected Ahead of President Trump's Speech

In a speech that will be watched by millions of viewers in the United States and around the world, the President is expected to speak of his presidency and address pressing issues like his plans for health care, the tax system, the military, and his goals for his administration...

Gold Trades Below Resistance Ahead of the Fed and NFP

We will see the release of the US ISM Manufacturing PMI, and ISM Prices Paid for January, at 15:00 GMT on Wednesday 1st February...


Sterling Struggles Ahead of Theresa May's Speech

Theresa May will make a speech outlining her plans for Brexit tomorrow, Tuesday 17th Jan, before the UK triggers Article 50 to leave the EU...

Dollar Turn-around on Trump's Press Conference

President Elect Trump's first press conference after his victory in the US presidential election, was held yesterday around at 16:00 GMT. It has caused great volatility to the dollar and the markets...

Gold Nears Major Resistance Ahead of Trump’s Press Conference

Gold prices have rebounded since mid-Dec after testing the significant support line at 1120. On the 4 hourly chart, gold bullish momentum has been strengthened since the beginning of this year, helped by the dollar retracement...


Searching for a new narrative

Popcorn at the read today as President elect Trump has a scheduled news conference later in the day (around 16:00 GMT). Markets have become used to listening to him in 140 characters or less over the recent weeks, so a more elongated narrative should be welcome...

The sterling conundrum

Yesterday's early weakness in sterling, on the back of the latest comments from PM May surrounding Brexit, took cable close to key support levels and the resilience seen through most of the post US election period has been unwound...

Selling into USD strength

In summary, Friday US jobs report was pretty much in line with expectations, although the slightly better data on earnings gave some support to the dollar into the end of the week. As a result, the US currency was little changed from Tuesday opening levels...

  


Share: