Dec 16


  • BY:
  • December, 16th, 2015 20:27 +00:00

Good evening,

for the first time since June 29th 2006 the Federal Reserve lifted interest rates, by 25 bp, in unanimous vote. The FED is confident that inflation will rise, and given the considerable improvement in the job market and the risk of credibility, the rate hike was taken for granted. Market reaction was quite nervous, with the US dollar down just after the announcement but after it recovered and now is gaining 39 pips at 1.0967 (+0.36%).  The Greenback is losing ground against all major currencies, and stock indices made a bullish spike and may start a retracement.  Higher rates in US does not mean a strong dollar for 2 reasons: first EurUsd did not go below 1.0432 when the Eurozone was evaluating the Grexit option last March, and the parity was avoided again at the beginning of the month when Draghi did not increase the ECB Quantitative easing. Second, even in case of a pull factor (rates abroad should rise to keep unchanged risk premium), Swiss Franc, Yen and Euro are the most preferred funding currencies for carry trade, thus a retracement of Indices should lift the Euro.

US indices are in positive territory but off their intraday highs, with the S&P up 22.19 points at 2,065.6 (+1.09%). Crude Oil is diving 1.66$ at 35.69 $/barrel (-4.44%), and just after the release of Inventories (+4.8M) the commodity gapped down and increased its intraday downtrend. Gold is up 11.1$ at 1,072.7 $/oz (+1.05%).


(20:20 GTM)