The most important day of the week is today and investors are going to remain laser focus towards the concluding remarks of the FOMC two day meeting. Investors will endure caution ahead of this statement, consolidation and low volatility could be the name of the game. However, this will change very swiftly once the statement is released.
The Fed has reminded the market participants over and over again that the era of cheap money is coming to end and they should prepare themselves for the borrowing rates moving back to their normal level. Unquestionably, this spooked markets initially and every headline since then has made markets jump out of the bed. Nonetheless, the actual and real print of this policy can only be seen when such announcement will actually be made. Therefore, today’s meeting does have a significant importance. Although, it is true that there is no press conference scheduled after the statement and this usually downgrades the elements of surprise. But, traders clearly understand the importance of this statement, because this will be the last official statement by the Fed before the September rate hike, which many have prepared themselves for. So, if September is the month of the first rate hike, then surely you want to pay full courtesy to each and every single word out of this statement.
Although, the equity markets in Europe are showing a positive sentiment this morning, but everything could change extremely rapidly after the FOMC statement. The two derivatives, which could potentially see the massive swings on the back of the Fed decision are gold and the dollar. If the report does provide clear clues for a rate hike in September, we could see the floor cracking further for gold and another leg of the sell off may push the price below the 1050 level. The same sentiment will also push the King Dollar higher. Any further dollar strength is not really a desirable outcome for the U.S. companies which are already pressed under this.
Miss Yellen is under tremendous pressure and if someone cannot afford to make any mistake in their decision is her. The Fed has already been blamed in the past for so many lousy decisions and not assessing the economy correctly. Therefore, the pressure is even more intense this time for them and they have to be absolutely certain that the economy is fully capable of bearing the weight of a U.S. interest rate hike. What they cannot afford now is seeing all their hard labor going downhill. They must understand that a rate hike is going to make the commodity rout even more intense, it will shake the emerging markets even harder and finally, the dollar strength will become firmer, which has been a massive headwind for the U.S. companies. Yes, they can always reverse their course of action, but more importantly, it will damage their reputation even further and investors will lose their confidence in their ability to assess the economy.
In terms of stock news, Sky media company has shown robust growth after the acquisition. The growth for the full year was immensely promising and this is primarily on the back of the growth from their other arms which are based in Germany and Italy. The revenue adjusted for like or like was very much in line with analyst’s expectations. The customer growth in the UK and Ireland has also strengthen over the course of this time and now the firm has nearly 12 million customers.
Disclosure & Disclaimer: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.
by Naeem Aslam