Once again markets got it right

September 22, 2016

“We trust the economy, yet not enough to tighten monetary policy” this was the message sent by Chair Janet Yellen to markets on Wednesday to explain the motives for keeping rates on hold in September.

Although the monetary policy decision was viewed as dovish which sent equities higher across the board and the dollar lower, the Federal Reserve has never been seen as divided so far this year.

Three out of the ten voting members dissented against the decision, calling for an immediate rate hike, this made the call for a December rate increase much stronger. Although Yellen confirmed that a November meeting is a live one, her body language didn’t really reflect high confidence and neither markets did buy it with only 12% priced in for a move in November.

Key takeaways from the Fed’s decision:

Major changes in statement: “The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.” A strong signal that a move will come by December.

Dots continue to fall: The “dot plot” used by Federal Reserve members to mark their expectations for the path of interest rates showed 25 basis points increase by end of year, but more interestingly projections were scaled down in 2017 and over the longer run, suggesting a new normal for interest rates. In 2017 expectations are now for two rate hikes instead of three, and to reach 2.9% on the longer run versus 3% in June’s projections.

Growth scaled down: Growth expectations were trimmed by 0.2% in 2016 to 1.8%. Remarkably, the 2% magical number is hard to reach on the longer run too, with medium forecast falling to 1.8% from 2%.

Equities rise, yields slump

Markets received a boost today with Asian and European equities following Wall Street higher after Nasdaq Composite closed at a record high. European bond markets also got a lift with yields dropping across the curve. Yields on German 10 year bonds fell back into negative territory, while UK bonds among the best performers with yields on 10, 15 and 30 years gilts falling more than 7 basis points.

Publication source
FXTM information  FXTM reviews

February 23, 2017
FOMC meeting minutes signal rate hike fairly soon – dollar unimpressed
The minutes from the most recent FOMC meeting three weeks ago – the first such meeting since Donald Trump’s presidential inauguration – were released on Wednesday afternoon...
February 23, 2017
Political instability hits the Euro
The Euro plummeted to a 6-week low in today’s trading session before slightly recovering as predictions of political instability swept through the European Union on the back of upcoming elections due out in the upcoming months...
February 23, 2017
Gold prices remained under pressure
The precious metal traded mostly sideways on Wednesday. Tuesday’s recovery helped gold to reverse all its early losses. Buyers returned the spot to the 1240 hurdle where the pair XAU/USD stood still the first part of the day...

Grand Capital Rating
XM Rating
Tickmill Rating
 FXTM Rating
NPBFX Rating
FxPro Rating

OptionBit Rating
Dragon Options Rating
Anyoption Rating
First Binary Option Service Rating
Binary.com Rating
EZTrader Rating