Bullet Report: Fed’s Dudley Reverses Market – FOMC Minutes Tonight

By | August 17, 2016

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 Today’s main release will be the FOMC minutes which need to indicate just what the likelihood for a rate hike is. Yesterday, Fed’s Dudley, delivered comments that he supports a rate hike in 2016 to which the market reacted immediately. Currently, fed fund futures are pricing in 55.1% opportunity of a December hike. Elsewhere, UK will release employment numbers, and as yesterday the data could trigger a big move especially along with the reduced liquidity in the markets these days.   

Currencies: Yesterday the USDJPY dipped below 100 for the very first time since July 8th reaching 99.52. The move was quickly reversed to 101.00 after Dudley’s comments which restored confidence in Dollar Bulls. Also, at these levels, traders speculate that the BoJ would certainly intervene as a rather strong JPY is not helpful for Japan’s exports. GBPUSD Likewise reversed its slide to 1.2850 levels and rebounded to close the day 250 pips higher, after Data revealed that Inflation was higher in the UK as previously estimated. High inflation discourages a reduced level of interest rates, boosting speculation that the BOE would certainly not cut rates further.

Stocks: US stocks were sold off yesterday, closing off record highs set the previous day, as investors digested the hawkish comments from Fed’s Dudley. Any interest rate hikes are traditionally not good news for stock market as the higher interest rates might shift funds to fixed long term deposits instead of the stock market. The S&P 500 fell 12 points, or 0.6%, to close at 2,178.15. The Dow Jones closed down 84.03 points, or 0.5%, at 18,552.02. Asian shares were mixed early Wednesday, a day after China signaled its intent to further open up its equity markets to foreigners.

Oil and Gold: Oil prices rose to a fresh one-month high overnight after news that Russia planned to meet the OPEC in October, raised hopes of a collective cap on output. On the other hand, GOLD dropped to $1340 as any hints of interest rate hikes put tension on the yellow metal.

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