Weekly Market Outlook, 8 – 14 February 2016
Fed rate hike expectations fade
Global markets traded precariously between risk-on and risk-off as the debate over the Feds monetary policy path and China economic condition continued. Overall, it was a bad week for USD bulls as disappointing domestic data increased the likelihood that the Fed would not raise rates in 2016. Thereby, decreasing the effectiveness of the popular policy divergence trade, this had fueled much of the dollar demand. Yet, the Fridays payroll report provided evidence that labour markets were tightening and pressure on wages are likely to accelerate. Incoming US economic data will be critical at determining the Feds strategy. The BoE provided a gloomy outlook by lowering official growth forecasts and pushing out rate hikes till mid-2017. Swiss franc traders were haunted by past aggressive SNB actions, suspecting FX interventions as the EURCHF traded higher. The verbal battle between asset managers and China policy maker’s intensified over probability of further devaluations. In Russia, the central bank will likely raise rates to protect the ruble from additional depreciation.
In this week’s report you can find:
- Speculation Over SNB Intervention
- Russia: Still Willing To Increase Its Forex Reserves
- Dovish BoE Will Weigh On The Pound
- China’s Slow Motion Currency Crisis
- U.S: Hoping For Stronger Data
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