Risk assets rally on FOMC minutes

Thursday, January 08, 2015

The dollar traded towards a fresh nine year high today, rallying towards 92.529 after building on firm support from the open at 92.00 as investor confidence gained on Fed comments. Details from December’s FOMC meeting minutes released yesterday highlighted the outlook that policymakers did not expect interest rates in the US to rise until at least April. The clarification offered further transparency to the Fed’s previous comments that interest rates would be kept low for a “considerable time”, interpreted as keeping rates unchanged at its January and March FOMC meetings.

With market participants gaining fresh insights into the Fed’s outlook the appetite for risk improved today with global equity benchmark indices on both sides of the Atlantic extending yesterday’s gains as investors took advantage of the recent buying opportunity. However, investors would be wise to take the points discussed during December’s FOMC meeting with a pinch of salt as the minutes stressed that any eventual rates rise would be dependent on economic data, with a keen eye on the labour market as well as inflation data.

The Bank of England voted to keep rates at the record low of 0.5% for another month, keeping monetary policy on hold despite recent indications of stronger economic activity and the prospect of wages improving as a result. Members of the MPC still expressed concerns regarding inflation pressures with a number of economists expecting a rates rise to be postponed until at least Autumn. Sterling lost further ground against the dollar, edging lower for the fifth straight session as the currency traded towards an eighteen month low against the dollar, reaching 1.5035 at one stage.  

DXY rallies higger on renewed optimism

DXY Curncy DOLLAR INDEX SPOT 2015 01 08 15 18 51

GBP extendeds delcines against USD

GBP Curncy British Pound Spot 2015 01 08 15 19 16

Topics: US Fed, BoE, DXY, GBP
More from: Kash Kamal