Friday September 16, 2016 - 21:29:19 GMT
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Fed Rate Hike: Mission Abort!
John M. Bland, MBA
So here we go again. The next Fed policy decision is scheduled for Wednesday, September 21 at 18:00 GMT. Fed Chair Yellen had put this meeting into play for a possible 25bp rate hike recently at the Jackson Hole Symposium, but economic data between then and now have been disappointing and called the outcome of the meeting into question. Then a week ago, Boston Fed President Rosengren, a former dove, seemingly sent a message that this meeting is still in play. Subsequently on Monday, Fed Governor Brainard made clearly dovish comments. She was the final Fed official to comment ahead of the quiet period heading into the policy decision. Markets took her comments to be a signal that a rate hike is not on the table for this week. Some say that Fed Governors, as opposed to regional Fed Presidents, are unlikely to take a position in opposition to the Chair. Fed Funds Futures have seen the odds on a rate hike on Wednesday to below one in ten. The markets have spoken very clearly that they expect no rate hike at this meeting.
Current Market Conditions
Central banks continue to be a source of market volatility. The major focus in the week ahead will be policy decisions by the Bank of Japan and the Federal Reserve. There is a lot uncertainty surrounding the Bank of Japan decision. Stories have surfaced that the BOJ intends to take actions to steepen Japanese yield curve to help bank earnings. Also there is chatter about interest rate cuts and additional Quantitative Ease (QE). Recall the BOF invented QE over two decades ago, and that Japan has been mired in a recessionary economy ever since. Trading in the USD has been sluggish over the past week as its next policy decision has been keenly awaited. Uncertainty over what policy decision the central bank is going to make has unsettled trading. In the end, the markets have decided for themselves that policy will be held steady. Concern the Fed will soon lead global central banks into a period of "policy normalization" has seen volatile equity prices and rising bond yields.
WEEKLY HIGH IMPACT NEWS:
00:00 CN- Holiday
14:00 US- NAHB
12:30 US-Housing Starts/Permits
03:00 JP- BOJ Decision
14:30 US- EIA Crude
18:00 US- Fed Decision
12:30 US- Jobless Claims
14:00 US- Existing Homes Sales
21:00 NZ- RBNZ Decision
All Day- flash PMIs
12:30 CA- CPI & Retail Sales
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland
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