MARKET BRIEFING – LONDON OPEN 16.09.2015
With the United States on a course to end a six-year period were the benchmark Federal Funds interest rate is effectively at near zero levels, there is now a growing global concern that the FOMC’s action could have a potentially devastating effect on the Emerging Market nations.
The Federal Reserve chairwoman Janet Yellen and her colleagues on the committee are expected by many to cap a period of growth and better data for the United States economy by increasing interest rates by 10 to 25 basis points.
The FOMC has been spurred into action by an improvement in the employment picture with both the Non-Farm Payroll and Average Earnings data underscoring the strength in the US job market.
However with inflation data out this afternoon the Federal Reserve may want to see the Consumer Price Index data shrug off the effects of chronically low energy prices.
The World Bank in its aptly named report “The coming US interest Rate Tightening Cycle: Smooth sailing or stormy waters?” was released to be perfectly timed just before the FOMC is to deliberate and come to a decision. The World Bank report has voiced concerns that a move increase interest rates could cause major economic fallout for Emerging Market economies.
However, the World Bank did go on to say in its report that due the very long lead up time to the US interest rate decision and due to the expected shallow slope any tightening cycle may take, that the Emerging Market economies could work through this new interest rate environment without major consequences.
The World Bank did point to some dark clouds with concerns that Emerging Market nations who are excessively exposed to foreign denominated debt could suffer difficult times with falls in living standards and economic contraction during the period when the United States begins to normalize the low-interest rates environment.
Will the FOMC take heed of the World Banks concerns? For sure the Federal Reserve will try to mitigate risks if an interest rate hike could cause economic fallout in the Emerging Markets and China. However, the FOMC has also got to look after its own house and if this means raising interest rates is necessary to correct possible future imbalances in the domestic economy then it will act.
As for tomorrow, my feeling is that the FOMC can and will hold off for now but give further guidance which prepares the ground for a rate increase in December or early in 2016.
EURUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.1365
Target 2: 1.1170
Projected range in ATR’s: 0.0097
Daily control level: 1.3000
GBPUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.5440
Target 2: 1.5245
Projected range in ATR’s: 0.0096
Daily control level: 1.5450
USDJPY
The intraday technical outlook
Trend 1 hour: Down
Target 1: 121.55
Target 2: 119.25
Projected range in ATR’s: 1.14
Daily control level: 120.60
USDCHF
The intraday technical outlook
Trend 1 hour: Up
Target 1: 0.9830
Target 2: 0.9650
Projected range in ATR’s: 0.0091
Daily control level: 0.9670
USDCAD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.3355
Target 2: 1.3140
Projected range in ATR’s: 0.0109
Daily control level: 1.3220
AUDUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 0.7230
Target 2: 0.7055
Projected range in ATR’s: 0.0086
Daily control level: 0.7080
GOLD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1117.00
Target 2: 1093.00
Projected range in ATR’s: 11.57
Daily control level: 1103.00
OIL
The intraday technical outlook
Trend 1 hour: Up
Target 1: 48.50
Target 2: 43.00
Projected range in ATR’s: 2.54
Daily control level: 44.30
MORE ON ACFXblog.com