Financial News December 15, 2015
Fed’s second rate hike likely in April, 2016
The FOMC meeting on policy decission is scheduled tomorrow. The Fed is expected to hike rate for first time after almost 10 years. Looking forward, analysts foresee a series of rate hikes next two years.
Some economic indicators hint the economy will rebound in Q4. Moreover, WTI crude oil is currently trading 10 dollars below FOMC target at USD36 per barrel.Further fall in oil prices will mire the EMs in crisis as corporate debt and bankrupties in the commodity sector. The FOMC is expected to take a cautious monetary majors.
“We expect the second and third hikes to take place in April and September next year, respectively (every third meeting). The fourth hike is likely to come in December. In 2017, we expect a hike every other meeting (March, June, September and December)”, argues Danske Bank.
Market Review December 15, 2015
The Reserve Bank of Australia released during the Asian session this morning its December meeting minutes. In the text, the central bank suggested that the central bank is in no hurry to cut interest rates. Furthermore, RBA said that recent flow of domestic data had generally been positive. In addition, output growth is expected to strengthen gradually over the next two years. Core inflation rates remained stable, but generally below the central bank’s target. The RBA said that the Australian Dollar is adjusting to significant declines in key commodity prices and boosting demand for domestic production. The central bank reiterated that the outlook for inflation might afford “some scope for a further easing of monetary policy”. Moreover, the board will continue to assess the outlook and judge whether or not the current state of monetary policy is most effective for sustaining growth. Overall, the meeting minutes likely further weighed on RBA rate cut bets. The document appeared to justify the central bank’s relatively neutral monetary policy tone. Released also from Australia during the session, House Price Index (HPI) rose 2.0% versus the estimated 2.1% while New Motor Vehicle Sales rose 1.0% compared to the previous -3.7% decline. AUD/USD rose slightly, reaching as high as the 0.7283 level and currently is trading near the 0.7245 area.
Released during the early European session, Switzerland’s Producer Price Index (PPI) rose 0.4% beating the estimated 0.1%.
The economic calendar for the day is rather busy with economic releases from the United Kingdom the United States, New Zealand, Canada and the Eurozone. The key events would be the United Kingdom inflation data, German ZEW Economic Sentiment, Canadian Manufacturing Sales, New Zealand’s GDT Price Index and the United States CPI and Core CPI.
Data releases to monitor:
GBP: CPI, MPC Member Haldane speech, PPI Input, RPI, Core CPI, HPI, PPI Output, BOE Quarterly Bulletin, CB Leading Index.
EUR: German ZEW Economic Sentiment, ZEW Economic Sentiment, Employment Change.
CAD: Manufacturing Sales, BOC Gov Poloz speech.
USD: CPI, Core CPI, Empire State Manufacturing Index, NAHB Housing Market Index, TIC Long-Term Purchases.
NZD: GDT Price Index, Current Account.
Trade Idea of the Day
GBP/AUD
Currently the pair is trading at 2.0903. Traders must monitor the 2.1213 resistance level and the support level 2.0554 for possible breakouts. A possible scenario would be a movement towards the 2.0805 support level, where a break may lead to the 2.0690 area. An alternative scenario could be a movement towards the 2.0962 resistance level, where a break may lead to the 2.1072 area.