MARKET BRIEFING – LONDON OPEN 17.09.2015
We have finally made it to Thursday. As most of you should know, today the United States Federal Reserve will announce their long-awaited interest rate decision. Will they or won’t they pull the trigger and begin a path of Federal Funds Rate normalization.
We have for best part of a decade lived through a period of extraordinarily low interest rates. In these times when global interest rates have been close to zero levels, this era of cheap money has boosted equity markets and fed ballooning Emerging Market economies who have gorged themselves on cheap US Dollar denominated credit.
The prudent have during these artificial times of plenty have done what they can to get their houses in order with austerity being the rallying cry coming from the Westminster Parliament in London and from the corridors of the Bundestag in Berlin.
There has been a great deal of wealth creation during this artificially low-interest rate environment. One only needs to look at the creation of wealth in the London housing market which has allowed modest property owners to amass a great deal of wealth without breaking a sweat while others had taken the opportunity to deleverage and pay back debt in anticipation of the end of the easy times.
Summer never lasts forever. The decision makers in the Central Banks and Governments have had seven years since the events that sent Lehman’s into bankruptcy to reform the global financial system. The decision to embark on a massive Quantitative Easing program when the financial crisis began did offer some solutions, however, the Emerging Markets have now become a global economic headache and Greece is still a financial basket case.
The FOMC, however, has to put to one side the problems in the Emerging Markets and act in the interest of the United States economy. The recent US jobs data has been good, however, yesterday inflation data was weak.
Will the FOMC ignore the weak CPI numbers and pull the trigger now? I think not, however, the reason for this possible reticence to lift off is not due to the recent data but more to do with the Emerging Market story.
The consensus amongst market watchers is that only some 25% believe that the Federal Reserve will hike interest rates today. There is a greater probability that the FOMC will wait until October. The Federal Reserve Chairwoman, Janet Yellen could wait until December, but this will once again leave her a hostage to data with event cycles for October, November, and December having to be allowed for.
The Fed, however, could confound the markets and raise rates this evening. If this was to happen it is very much a case of the message that is given to the markets. Will a rate rise be a “one and done” strategy or will the Fed signal that it is going to embark on a long cycle of interest rate increases. A more rational policy could be to increase rates and give a message of “wait and see”.
If the FOMC does not increase rates this evening, then of course the Fed statement is of paramount importance. Will the FOMC give specific forward guidance on when a rate increase will happen in the future? I very much doubt that Janet Yellen would be so accommodating, however, a message from the Fed that it is ready to move should be enough for the market to absorb this news and work through the short-term volatility.
EURUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.1385
Target 2: 1.1195
Projected range in ATR’s: 0.0094
Daily control level: 1.1210
GBPUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.5590
Target 2: 1.5385
Projected range in ATR’s: 0.0103
Daily control level: 1.5325
USDJPY
The intraday technical outlook
Trend 1 hour: Up
Target 1: 121.65
Target 2: 119.45
Projected range in ATR’s: 1.11
Daily control level: 120.10
USDCHF
The intraday technical outlook
Trend 1 hour: Down
Target 1: 0.9800
Target 2: 0.9620
Projected range in ATR’s: 0.0091
Daily control level: 0.9760
USDCAD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.3275
Target 2: 1.3065
Projected range in ATR’s: 0.0106
Daily control level: 1.3250
AUDUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 0.7255
Target 2: 0.0.7085
Projected range in ATR’s: 0.0085
Daily control level: 0.7080
GOLD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1131.00
Target 2: 1107.00
Projected range in ATR’s: 11.93
Daily control level: 1103.00
OIL
The intraday technical outlook
Trend 1 hour: Up
Target 1: 50.00
Target 2: 45.00
Projected range in ATR’s: 2.44
Daily control level: 44.30
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