MARKET BRIEFING – LONDON OPEN 09.10.2015
The latest release of Federal Reserve minutes told us that the members of the committee were, on the whole, confident that the United States economy could bear the cost of an interest rate rise in the latter part of 2015. This was despite the fact that the deteriorating Jobs Report that followed the FOMC meeting gave the markets little confidence that domestic economic conditions are improving.
The FOMC chairwoman, Janet Yellen and her colleagues on the committee viewed it “prudent” to keep the Fed Funds interest rates at the <0.25 target. The Federal Reserve continued to be a hostage to data with the policy decision makers looking for confirmation that the United States economy is on the path of sustainable growth and that inflation would reach the 2% target which is deemed by the majority of Central Banks as normal healthy.
The FOMC has now according to the minutes highlighted the risks of a continued contraction in China and the Emerging Market nations. There is a fear being that US Dollar would strengthen further as it is fuelled my higher US interest rates. The stronger US Dollar would have the effect of harming the competitiveness of exporters and in turn further depress the domestic growth outlook.
It now looks unlikely that the FOMC will move on interest rates in October. Furthermore, a December Fed Funds interest rate increase is now become more and more a distant possibility with the markets over the past week pricing in a move in happening in March 2016.
Confidence and confirmation are now quickly becoming the new Federal Reserve catch phrases. The use of this language by the FOMC only highlights the indecisive mood that has now gripped the committee. The minutes of the Fed meeting told a story of the Doves on one side, deciding to sit on the fence in fear of acting prematurely and the Hawks on the other side, arguing the case of an interest rise so as to avert inflationary pressures causing unwanted consequences.
The consequence of the current Federal Reserve failure to act leads to a growing view that FOMC policy is diverging from tight constraints of monitoring inflation and the labour market. Federal Reserve policy has morphed since Janet Yellen took up its leadership. We now have a Federal Reserve that takes into consideration every possible crisis, be it Greece, China, the Emerging Markets and then fails to act.
The fear of pulling the plaster will create a belief that the Federal Reserve will never act because the conditions will never be perfect for a rate increase. The FOMC needs to grasp the bull by the horns. The conditions will never be optimal for a rate increase as there will always be another crisis around the corner. The Federal Reserve should act on interest rates once the metrics on jobs and inflation tell them that conditions or more or less met.
EURUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.1375
Target 2: 1.1175
Projected range in ATR’s: 0.0100
Daily control level: 1.1235
GBPUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.5450
Target 2: 1.5240
Projected range in ATR’s: 0.0106
Daily control level: 1.5260
USDJPY
The intraday technical outlook
Trend 1 hour: Down
Target 1: 120.75
Target 2: 119.10
Projected range in ATR’s: 0.84
Daily control level: 120.10
USDCHF
The intraday technical outlook
Trend 1 hour: Down
Target 1: 0.9735
Target 2: 0.9560
Projected range in ATR’s: 0.0088
Daily control level: 0.9740
USDCAD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.3115
Target 2: 1.2915
Projected range in ATR’s: 0.0100
Daily control level: 1.3075
AUDUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 0.7340
Target 2: 0.7180
Projected range in ATR’s: 0.0081
Daily control level: 0.7160
GOLD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 0.7340
Target 2: 0.7180
Projected range in ATR’s: 0.0081
Daily control level: 0.7160
OIL
The intraday technical outlook
Trend 1 hour: Up
Target 1: 51.00
Target 2: 48.50
Projected range in ATR’s: 1.79
Daily control level: 48.00
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