Market Brief (26-Jan-2012)

Market chatter overnight has been dominated by last night’s FOMC meeting, where Fed members struck a noticeably dovish tone. Significantly, the committee pledged to keep rates on hold at their current ultra-low levels until late 2014 – and indeed some members voiced a preference to push that date back another year or two. In addition, Fed Chairman Bernanke clarified that the decision to keep rates on hold until late 2014 implied that asset sales (i.e. the reversal of past quantitative easing) would not take place until 2015, meaning that we are likely to have another 3 years of ultra-loose monetary policy from the US. In response to these events, the dollar sold off against most of its currency peers; with USDJPY dropping back to 77.50-60 levels, and EURUSD breaking above the 1.3100 level for the first time in over a month.

The second central bank meeting of the evening was the RBNZ; and as expected the central bank kept rates unchanged at 2.50%, while reiterating that the “uncertainty around global conditions” and “moderate pace of domestic demand” meant that keeping rates steady were appropriate. It appears that Governor Bollard is in no hurry to reverse last year’s emergency rate cuts (applied in the aftermath of the Christchurch earthquake), and as long as the Eurozone crisis lingers on, rate hikes are off the agenda.

Coming up in today’s session we have Swedish consumer confidence and unemployment rate, followed by US durable goods orders, jobless claims data and leading indicators.

By

M.Zohaib Gadit

Forex Trading Consultant