Markets are about to start a new avalanche as the Federal Reserve policy announcement is approaching, but let’s have a quick review of the most important events from the last couple of days as well as the implications for the next period:
- German Ifo Business Climate was reported up to 106.7 points, the QE program will be running in March and the confidence of market participants that the EU will be able to keep Greece within the group represents the elements that determined the German index – DAX – to run to the 10855 points level;
- Concerning the economy of Great Britain the preliminary quarterly GDP was published down to 0.5%, BBA Mortgage Approvals fell to 35.7k and the services index decreased to 0.8%. All these news is leading to troubles in the British economy so BoE has to think twice before modifying the interest rate. The British pound may weaken further before the publishing of the official bank rate on 5th of February;
- The Swiss franc had variations of about 300 points in only one day after SNB Vice President Jean-Pierre Danthine declared that the central bank is still prepared to intervene to keep the currency relatively weak. Further, either the SNB intervention or the market participants’ euphoria led to the appreciation of the EURCHF up to 1.0265 while the USDCHF reached up to 0.9045. These upward trends may still have power to continue the rallies;
- The American dollar has been losing ground lately as the long lasting and strong trend of appreciation needed some serious corrections, but also as a reaction to a possible postponement of interest rate change. Most likely, later today the Fed will choose to wait a little bit more as the economy could be harmed by the strong appreciation of the dollar, the low price of oil and the strong divergence between the U.S. economy and the rest of the world. Yesterday the Core Durable Goods Orders were reported down to -0.8%, but the CB Consumer Confidence rose to 102.9 points.
The EURUSD currency pair may rally up to 1.1500 if the quotation will brake the 1.1405 resistance level as the volatility is due to increase ahead of the FOMC announcement.
The Australian dollar appreciated as the quarterly CPI was reported at 0.2% and the Trimmed Mean CPI rose to 0.7%, but the New Zeeland dollar may be under pressure as late tonight the RBNZ will decide the level of the interest rate. An interest rate cut could be a plausible scenario.
The American indexes lost points yesterday as the Microsoft shares lead the negative movement. The last hours helped indexes to recover the lost points as Apple reported better than expected sales. Technically speaking, the price charts are looking pretty bullish but we can’t oversee the tension in the market, which could lead to a different outcome.