Central bank policy meetings in focus

21 September, 2016

Central bank policy meetings in focus

A strong feeling of anxiety engulfed the financial markets on Wednesday as investors awaited the heavily anticipated Fed and BoJ central bank policy meeting decisions which have the ability to create explosive levels of volatility. Asian markets rallied this morning with the Nikkei lurching +1.91% higher as of writing after the Bank of Japan overhauled its policy framework. European markets were flat on Tuesday and this could rollover into the new trading day if market participants remain on the side-line ahead of the Fed meeting. Although Wall Street painted a similar static picture to Europe, some direction could be achieved if the Fed takes action or provides further clarity on US rate hike timings.

The praised stock market rally which repeatedly seized the limelight this year continues to display signs of exhaustion as the mixture of uncertainty and concerns over the global economy sour risk appetite. Depressed oil prices have heavily weighed on sentiment while the uncertainty ahead of the US elections could encourage investors to scatter away from riskier assets. With the ingredients of a bear market ripening by the day, stocks could be poised for a steep decline in the future if provided the correct catalyst.

Will the Fed take action?

The Dollar has been on a chaotic rollercoaster ride this month with prices recently displaying an incredible rebound as optimism grows over the Federal Reserve potentially raising US interest rates before the end of 2016. Although expectations that the central bank may take action in September has been thoroughly discounted following the uncertainty and soft domestic data, the glimmer of hope for December being a live meeting could keep the Dollar buoyed. Attention may be directed towards the FOMC meeting where Yellen could potentially tilt towards the hawks which could leave the door wide open for the Fed to break the trend of central bank caution before year end.

Bank of Japan keeps rates unchanged

Yen bears were unleashed on Wednesday following the Bank of Japans decision in setting a long term interest target in an overhaul of its monetary stimulus programme. The central bank left negative rates unchanged at 0.1% but discarded its base money target which was replaced with a yield curve control. Although the markets warmly welcomed this unexpected change in policy framework, questions may be asked on the sustainability of both the positivity and Yen selloff.

Japan remains entangled in a fierce battle with slowing economic growth while static inflation has left the Bank of Japan under noticeable pressure. If this policy overhaul fails to improve Japan’s situation in the medium term, then the Yen could regain ground as optimism fades over the central bank’s ability to revive growth.

Sterling gripped by lingering Brexit jitters

Sterling was left vulnerable to heavy losses on Tuesday with the GBPUSD sinking towards 1.294 after news highlighting the UK’s uncertain future relationship with the EU enticed sellers to attack. Sentiment remains bearish towards the Sterling with further declines expected as the post Brexit jitters haunt investor attraction towards the currency. It seems like investors are slowly digesting the impacts of Brexit to the UK economy with fears heightening over the potential long-term economic damages. Although the Bank of England decided to leave UK interest rates unchanged in September’s policy meeting, the bias towards further rate cuts in the future could keep the Sterling pressured.

From a technical standpoint, the GBPUSD is bearish on the daily timeframe as prices are trading below the daily 20 SMA while the MACD has crossed to the downside. Previous support around 1.3000 could transform into a dynamic resistance which encourages a further decline towards 1.2900.

Commodity spotlight – WTI Oil

WTI Oil rebounded from six week lows on Tuesday with prices lurching towards $44.50 after comments from OPEC sparked discussions that a production freeze deal could last longer than anticipated. Regardless of the short term gains, Oil remains heavily pressured and could be destined for steeper declines as the oversupply concerns haunt investor attraction. Oils main focus will be the pending informal OPEC meeting which if concludes unsuccessfully could leave prices exposed to steep losses. From a technical standpoint, bears need to break back down below $44 to trigger a steeper decline towards $41


Source link  
Sterling steady ahead of UK inflation data

Having successfully moved into phase 2 of Brexit talks, the focus will shift back to economic data in the UK. Today’s November CPI will likely be a market...

Market waits on Bank of Canada

With a US tax bill and a Brexit currently flying around in the markets it's hard not to get lost on the bigger picture for other countries as well.

Investors rotate from Tech to Financials

U.S. stock indices ended mixed on Wednesday. While the Dow-Jones industrial average closed at a record high after U.S. GDP showed the...


Consumer confidence hits record high

Consumer confidence was the star of the show today as it came in with its strongest reading since 2000. The reading of 129.5 (124 exp), is one of...

SP500 lifts to record high on US housing

The US market continued to steal the spotlight today in Monday trading as it continued to look robust as usual. New home sales m/m came...

Equities slide ahead of a busy week

Despite a record high close on the S&P 500 last Friday, Asian equities edged lower, led by Korean markets. Chinese stocks continued to decline...


Yen bulls jump on weak FED inflation

FOMC meeting minutes are always greeted warmly by the markets, as a glimpse of the potential future direction of the FED going forward...

S&P 500 hits record high

The US equity markets jumped sharply today on the back of positive economic data as US home sales m/m came in strongly at 5.48M (5.40M exp)...

European currencies dip on German politics

The Euro had a pause for concern in the evening trading session as the coalition talks in Germany fell apart leading to a political crisis in Germany.

  


Share: