MARKET BRIEFING – LONDON OPEN 01.09.2015
After the recent Chinese turmoil, many economists have shifted their outlook regarding the US interest rate hike closer to the end of the year, rather than the earlier expected month of September.
At the moment, the September rate hike has declined to below 50 percent according to a survey, conducted by Bloomberg recently, which is now down from 77 percent last month.
“Forty-eight percent of 54 economists surveyed Aug. 27-31 by Bloomberg News see a September increase in the benchmark lending rate, the first move up since 2006. That’s down from 77 percent in an Aug. 7-12 survey, though it is still double the 24 percent who say the first move will occur in December. Seventeen percent said October” – Bloomberg news agency reports.
The latest speech by the FOMC member and the Fed’s vice chairman Stanley Fischer at the 2015 Economic Symposium in Jackson Hole last Saturday gave no indications regarding the timing of the next rate increase. By and large, it seems to be a tough call for the Federal Reserve to make such a decision.
The Federal Reserve has last raised the interest rates nine years ago, with the increase by 25 basis points to 5.25 percent. However, following housing market collapse and the consequent sliding into recession have soon reversed these actions, with the Fed benchmark interest rate set between 0.0 percent and 0.25 percent by December 2008.
As the Federal Reserve monetary policy’s main function is to strive for the maximum employment and stable prices, in 2011 the central bank determined that 2 percent target inflation rate would be the best to achieve such results and keep the economic growth at a healthy pace.
A reduction of the interest rate is commonly promoting more consumer spending, increasing inflation and economic revival. This time, however, since the interest rate was already at zero and still deemed ineffective, further actions such a Quantitative easing programmes were taken. At the moment, all these measures have been completed and the US economy showing an improvement, with the jobs market being almost at the prerecession at 5.3 percent unemployment rate.
Hence, the Fed have started to consider the interest rates tightening, with such expectations sending the US currency up since the May of 2014. However sharp interest rate hike could cause the damages to not yet fully healed US economy, therefore such steps are still causing a contemplation among the US policy makers. In addition, the only expectations of such actions have already disrupted the global markets and put pressure on the emerging economies.
Surely enough the next rate increase should not exceed 25 basis points. Regarding the timing, some further lights will be given at the next Federal Open Market Committee meeting on 17 of September.
EURUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.1362
Target 2: 1.1058
Projected range in ATR’s: 0.0152
Daily control level: 0.1020
GBPUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.5460
Target 2: 1.5226
Projected range in ATR’s: 0.0117
Daily control level: 1.5815
USDJPY
The intraday technical outlook
Trend 1 hour: Down
Target 1: 122.54
Target 2: 119.70
Projected range in ATR’s: 1.4158
Daily control level: 124.60
USDCHF
The intraday technical outlook
Trend 1 hour: Down
Target 1: 0.9786
Target 2: 0.9554
Projected range in ATR’s: 0.0131
Daily control level: 0.9780
USDCAD
The intraday technical outlook
Trend 1 hour: Range
Target 1: 1.3270
Target 2: 1.3008
Projected range in ATR’s: 0.0131
Daily control level: 1.3055
AUDUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 0.7204
Target 2: 0.7018
Projected range in ATR’s: 0.0093
Daily control level: 0.7360
GOLD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1150.47
Target 2: 1118.19
Projected range in ATR’s: 16.14
Daily control level: 1112.00
OIL
The intraday technical outlook
Trend 1 hour: Up
Target 1: 55.42
Target 2: 50.90
Projected range in ATR’s: 2.257
Daily control level: 42.55
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