So, investors are divided in their views on the outcome of the next Federal Reserve meeting. It is understood that yesterday’s report on US retail sales only reiterated the theme still weak recovery of the US economy, and this resulted in a 28% chance of a rate hike, according to futures on interest rates. At the same time about 50% of the 102 economists surveyed by Bloomberg suggest that borrowing costs still rise on Thursday. The scenario assumes the FOMC meeting or two, but much more, respectively, increasing the chances of high volatility in US stock indices on this story. Here are four situations, arranged in order from the highest to the lowest probability:
- Fed raises rates, however, alluding to the fact that this year more of these steps should not wait. Dow Jones (YM) and S & P (ES) initially reduced to the nearest support, and then show a sharp turn.
- The Fed did not increase, but suggests that this year it will happen. The initial growth of Dow Jones and S & P, followed by an impressive but short-term sales.
- The Fed does not raise and does not give a hint. Continuous growth of Dow Jones and S & P.
- Fed raises rates and hints that in 2015 possibly one more rise if the economy allows. Long drop Dow Jones and S & P.
Commodity and raw market
Brent crude oil still could not pass the lower limit of the agreed last 2-week range of 47.00 – 52.20, and turned. It is possible now active will try to consolidate above 50.00. However, this should be certain conditions are met.
Firstly, we need to see a sharp decline in commercial energy reserves in underground storage as part of a weekly US report. Since the beginning of the week the market there are rumors that in Cushing really marked decline.
Secondly, it is desirable that the US dollar continued to fall under the yoke of the coming meeting of the Fed. This behavior is quite real currency, taking into account the recently published by weak data on retail sales, as well as growing confidence in the market that the Fed will not go on the hike.
It is worth paying attention to a very interesting behavior of the commodity currencies. For example, AUD / USD has become one of the fastest growing steam in the past week. Data on employment and a sharp rebound in copper prices have become a good help. Moreover, even weak reports from China on Sunday failed to stop the recovery of the Australian dollar, which means reducing the importance of the “China factor” for the oversold currency. Perhaps its role in stabilizing the position AUD plays and market expectations about a very slow transition mode full monetary tightening. It is likely that in the coming days, AUD / USD attempts to gain a foothold above 0.72 with a further target at the level of 0.7260.
Warning: Profitability in the past does not mean profitability in the future. Any projections are for information only and does not guarantee a result.