Volatility to dry up post Fed rate decision


21 December, AtoZForex.com, Lagos – With the Federal Reserve finally commencing rate hikes after about a decade, stake holders will be digesting the information from the post Fed rate decision which will set markets up for early moves next year, as the usual end of the year market dry up sets in. In the Fed’s words: “The Committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise, over the medium term, to its 2% objective”

Post Fed rate decision, the Bank of Japan also announced last week to expand its unprecedented monetary easing, announcing that “the central bank was going to extend the duration of the bonds it buys and start a new exchange-traded-fund purchase program.” This sent the yen into a strong rally across board on Friday, as it emerged the star performer for the day.

With data on Friday showing Canada’s inflation the lowest in the year, so far at -0.3%, while the inflation dipped to -0.1. The USDCAD is presently trading around 11 year highs, the pair will be closely watched as it begins to show signs of exhaustion.

This week, in addition to the expected dry up in volatility, the fundamental calendar is also sparse. Hence, we expect a quiet week.

US Final GDP q/q

Post Fed rate decision, US Q3 GDP growth is estimated to be revised to 1.9% from last month’s estimate of 2.1%. Personal consumption growth is forecast to also be to be revised south to 2.9% from 3.0%. The downward revision to the GDP is expected, considering recent downward revisions in data. Credit Suisse opines that: “Since Q3 GDP’s first revision, we have seen further downward revisions to manufacturing and wholesale inventories. The latest data on Q3 durable goods shipments also are looking weaker. And newly-released “hard data” on service spending suggest a downward revision to personal consumption on health care last quarter.” We also have the Core Durable Goods Orders m/m and unemployment claims on the calendar this week. The dollar lost ground on Friday, as profit taking seemed to be on.

Canada GDP

With the current weakness in the Canadian dollar and in recent data, further negative reports are expected. The GDP m/m for the country will be released this week, as well as the Core Retail Sales m/m.

Other notable economic news on the calendar this week include:

-New Zealand Trade balance on Tuesday

-UK current account balance on Wednesday

Think we missed something? Let us know down in the comments section.

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