Market Report – Aunty Janet

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Forex Market News

FOMC

Aunty Janet sees no “normalization” of rates. Just heard her say the Fed’s mandate is low jobs and price stability and that is what she is working on. To the Fed, the drop in oil is “transitory” and I would have to agree there. Some huge movements on the back of FOMC and it is mostly to do with the fact that Yellen sees higher rates further down the track than the market expects. The wording, which everyone has been breathlessly waiting for, was changed from “considerable time” to “patient”. This is not a change in policy intentions though. Whilst jobs is getting close to their target, the Fed sees inflation as still some time away. This pushed the interest rate hike horizon further out, hence the greenback and stock market continued to march higher.

Oil

Has been on everyone’s lips recently. However lower energy prices has to be a good thing for any economy so I do not see the fear of the price plunge as being justified. The safe haven bid that has traded this week is way over done. The US Fed’s calming mood this morning will start the unwinding of that safe haven bid. Oil has bounced around little bit but the sell-off is still happening and will continue, I think, to $40.

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