FOMC & oil are centre stage today
Quote of the day: “Oil has meant mastery throughout the twentieth century” (Daniel Yergin – The Prize)
January 27th: Highlights
- Fed unlikely to raise rates
- Markets and risk appetite remain reactive to oil price
There has been a slight pullback in oil this morning and consequently European markets are a little more cautious on the open, but the longer oil builds price support above $30, the stronger the belief will grow that prices have bottomed and we’re past the worst. The World Bank yesterday slashed its 2016 forecasts to $37 a barrel (down from $51), citing Iranian production and the resilience of US shale gas.
Market focus today is centred on the FOMC tonight. Following a near miss for US PMI services, which posted 53.7 (Vs. 54 forecast), it is still widely expected that the Fed will vote for no change today, allowing a little more time for the effects of the December rate hike to filter down to the wider economy. This is no real surprise, when you consider stock markets, oil prices and global growth forecasts have all followed a downward path since the Dec hike, and domestically the US data hasn’t exactly been setting records either. Many feel that this meeting could be a bit of a non-event due to the absence of a press conference, but the market will still study the statement for clues to support the belief that the next action is currently planned for March.
Also on the calendar today, we’ll see New Home Sales, which are forecast to rise by around 2% to 501,000. The weekly oil inventories report may add volatility to oil, with expectations of around 3.8m barrels. Finally, the Reserve Bank of New Zealand is expected to keep rates on hold at 2.5%.
Have a great day!
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