Fed mixed signals

28 January, 2016

The recovery in risk assets was rather snuffled out after last night’s FOMC meeting which was dovish, but a little less dovish than many had previously hoped for. The reaction from the markets was mixed and unsurprisingly volatile as both equities and the dollar fell, however the greenback has recouped its losses overnight. When you look through these mixed movements what we do know is that since December the economic data has been rather on the soft side, but despite this it’s still likely that a second hike will come in March before a pause. The problem with this is that they don’t want to make the same error that the ECB made back in 2011 under Trichet when they raised rates twice rather inexplicably in a move which was arguably a contributor to the current deflationary pressures, as well as lower commodity prices. The market is still pricing in less aggressive tightening than the Fed is suggesting and perhaps yesterday was a first sign that the Fed is moving towards the same thinking as investors.

Today the focus will be on sterling as we see the first release of last year’s Q4 GDP, expected to come in at 0.5%, up from 0.4%, but the year on year is due to decline from to 1.9% from 2.1%. Sentiment towards the UK economy has been waning throughout January and GBPUSD has been on a downward spiral since the middle of 2015, rather like the stock market. Later in the day there’s European consumer confidence and then US durable goods.


Source link  
CB Monetary Policy Unchanged

Thursday saw the latest Monetary Policy Committee (MPC) report from the Bank of England. The BoE stated that further modest increases...

No Surprises as Fed Raises Rates

The Federal Reserve, as expected, raised its benchmark interest rate by a quarter of a percentage point, to a range of 1.25% to 1.5%. The latest hike...

CB meetings dominate the week

With no impactful economic data releases on the calendar today, the markets are focusing on a plethora of Central Bank meetings scheduled...


No Surprises from BoC & ADP

In an unsurprising move, the Bank of Canada decided to hold its benchmark lending rate at 1%, after two small hikes earlier in 2017. The BoC stated...

Moderate Gains for USD

On Monday, the US Commerce Department released Factory Orders data for October, indicating that the continued strength in the Manufacturing...

OPEC Extends Output Cuts

On Thursday, OPEC (Organization of Petroleum Exporters) and non-OPEC producers led by Russia agreed to keep output cuts until the end of 2018...


US Economy Expands Faster Than Predicted

Data released on Wednesday showed that the US economy expanded at its quickest pace since 2014 in Q3. The US Commerce Department said that...

Political Turmoil in Germany Hurts EUR

The EUR lost ground against many of its peers on Monday on news that Chancellor Angel Merkel’s efforts to form a coalition government had collapsed...

USD Suffers on Subpoena News

The Trump Administration is back in the spotlight with news of a report that Special counsel Robert Mueller’s investigators have issued a subpoena...

  


Share: