About this course
These are longer-term market drivers that can have a bigger impact over the course of several weeks and months
Overnite the FOMC left interest rates on hold however the Feds thinking has changed since December 2018..In a big way. Remember that CB's are big boys when it comes to future direction of the the markets. Lets have a look at a few thoughts moving forward into 2019.
* Dce 2018 the Fed thought that it still had a lot of work to do to slow growth and contain interest rates. Here in Jan 2019, we were not expect an interest rate hike we did not think that the fed would not make any mention about raising rates in the future. rather they spoke about "adjustment" of rates which could be in any direction.
* During the press conference comments, the Fed chair seemed comfortable with the outlook but less concerned about inflation (remember that higher in inflation is the driver of higher interest rates). Jay Powell does listed to the market much more compared to previous Fed chair people.
* They also confirmed that they see lower longer level of reserves. thus let theor balance sheet roll off for a longer time. This will help the bond market.
* They reiterated that they view the the fed funds rate as a key tool for monetary policy.
* So, are we done with rate hikes? Look for rates to remain on hold for Q1 & Q2. Depending on a few things eg the recent governmnet shutdown and perhaps another shutdown in 3 weeks. Trade wars with China, Brexit outcome.if the previous items mentioned are positive for US then perhaps another rate rise 2nd half of the year rather than the forecast of Q2.
Watch this space.
How does this play out in your trading?
Pending if you are a long term, medium or even a day trader, it is handy to know what the drivers are. As my mentor always said...Do not stand in the way of a central bank. In this case we need to view day to day price action but within this keep in mind that the uS$ strength that we have seen for the past period could be over for now.