MARKET BRIEFING – LONDON OPEN 29.10.2015
The zero interest rate will last for at least month and a half, with no changes in the current rate, the Federal Reserve statement asserted last night. In their view, economic conditions have not altered significantly leaving the possibility for the hawkish move as soon as this December’s meeting.
As the investors had expected the Federal Reserve to remain dormant regarding the interest rate well until next year, the reference to the next meeting came as a surprise, sending the EURUSD pair to the new lows sharply.
The pair reached below 1.0900 mark within the first hour of the statement release, being the EURUSD two and a half month low. The US Dollar strengthened further, with the index yesterday’s high at 97.875, gaining more than 270 pips just within a week.
The line that was saying the global economic and financial developments “may restrain economic activities somewhat” was this time removed from the statement. It was also added that employment conditions are recovering at a satisfactory pace with “labour market indicators, on balance, show that underutilization of labour resources has diminished since early this year”.
Nevertheless, as the economy expanding at the “moderate pace”, there are still no improvements in the inflation rate outlook, with the inflation continue to run well below the 2% target set by the Federal Reserve. It was commented however that the indicator underperformance is due to the low energy prices and the prices of non-energy imports.
The votes came 9 to 1 with Richmond Federal Reserve Bank President Jeffrey M. Lacker expressed his view in favour of the interest rate hike once again.
The investors were expecting the next interest rate hike not earlier than the March 2016, with most views have now shifted towards the late January.
“The Fed statement was the first since 1999 in which policymakers pointed to a possible rate increase at the next meeting”, Michael Feroli, a previously economist at the US Central Bank, now at JPMorgan, commented to Reuters.
The Federal Reserve will now have some time to look at several important data before the next meeting on 15-16 December. Even though the two recent NFP releases were below expectations, FOMC could be tempted to act these numbers will improve before the middle of December.
The Bank will also closely observe the economic conditions outside the United States. The weakened markets such as China and Japan seeing the capital outflows to the more profitable venues, pushing the US dollar higher.
The likely additional quantitative easing measures in Europe, announced last week, are having similar consequences to the world’s major reserve currency. Stronger Dollar, therefore, could hurt the domestic exporters, and could make it even harder to reach the desired inflation target. It also sets additional obstacles for the jobs market to improve.
That might explain why the Fed might prefer to test waters and leave the door open, without making any solid commitments ate the moment.
EURUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.1020
Target 2: 1.0830
Projected range in ATR’s: 0.0096
Daily control level: 1.1080
GBPUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.5370
Target 2: 1.5167
Projected range in ATR’s: 0.0099
Daily control level: 1.5380
USDJPY
The intraday technical outlook
Trend 1 hour: Down
Target 1: 121.90
Target 2: 120.30
Projected range in ATR’s: 0.812
Daily control level: 121.25
USDCHF
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.0060
Target 2: 0.9820
Projected range in ATR’s: 0.0118
Daily control level: 0.9800
USDCAD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.3320
Target 2: 1.3070
Projected range in ATR’s: 0.0127
Daily control level: 1.3275
AUDUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 0.7200
Target 2: 0.7000
Projected range in ATR’s: 0.0095
Daily control level: 0.7300
GOLD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1172.00
Target 2: 1140.00
Projected range in ATR’s: 15.95
Daily control level: 1180.00
OIL
The intraday technical outlook
Trend 1 hour: Down
Target 1: 48.00
Target 2: 45.00
Projected range in ATR’s: 1.57
Daily control level: 46.50
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