It's all about the FED hike - Weekly Key Trading News 12-16/12

It's all about the FED hike - Weekly Key Trading News 12-16/12

With less than two weeks left to Christmas we are still ahead of the most important market event of December and perhaps one of the key ones this year. The way the Fed communicates interest rate hike will have major implications for literally every market around the globe. Investors will therefore scrutinize the US data, while the Bank of England meeting is on top of the agenda in Europe.   

The FOMC meeting (Wednesday: decision 7pm GMT, conference 7:30pm GMT)

We cannot stress enough how important this meeting is. The Fed is nearly certain to increase interest rates, a lack of such decision would be a shock to the markets. But this hike has been long discounted and the market reaction will focus on the communication. In our view a so called “dot-chart” will be crucial. The median dot saw 2 hikes for 2017 and 3 more for 2018 in September. If the median moves up market could see the move as a “hawkish hike” which in turn could be positive for the US dollar.

US data: retail sales (Wednesday, 1:30pm GMT) and inflation (Thursday, 1:30pm GMT)

Retail sales and inflation are just behind the NFP report in terms of significance for the markets. However, this time their impact might be starkly different. The retail sales data will be released ahead of the FOMC meeting and it may have an important effect on positioning ahead of the decision while the CPI might get lost a bit in the post FOMC environment. The sales data has been very strong so another strong reading could reinforce positive sentiment towards the US dollar just ahead of the FOMC decision.

The Bank of England meeting (Thursday 12:00am GMT)

The Bank of England is highly unlikely to change policy parameters this month but it will publish minutes from the meeting. The MPC was pessimistic about the economy in the longer haul when it met in November. However, the data has been generally upbeat since then. Retail sales was strong, wages ticked up, trade balance improved and only industrial output disappointed. We doubt the BoE could change its view but even a slight improvement in the assessment could benefit the GBP. 

About Author

Our research team will provide all technical and fundamental news as well as all inside information coming from London's City desks to help investors trade fx and stock markets. Be sure that you already follow our twitter account @XMarketsuk in order to be up to date with all latest analysis, news and inside information.

Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. X Markets and XSpot. do not take into account your personal investment objectives or financial situation. X Markets and XSpot. make no representation and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any member of X Markets Websites’ team, a third party or otherwise. This material has not been prepared in accordance with legal requirements promoting the independence of investment research and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and may not reflect the opinions of X Markets and XSpot. This communication must not be reproduced or further distributed without prior permission.

Risk Warning: Forex (FX) and Contracts for Difference (’CFDs’) are complex financial products that are traded on margin. Trading FX and CFDs carries a high level of risk since leverage can work both to your advantage and disadvantage. As a result, FX and CFDs may not be suitable for all investors because you may lose all your invested capital. You should not risk more than you are prepared to lose. Before deciding to trade, you need to ensure that you understand the risks involved taking into account your investment objectives and level of experience. Past performance of FX and CFDs is not a reliable indicator of future results. Most FX and CFDs have no set maturity date. Hence, a CFD position matures on the date you choose to close an existing open position. Seek independent advice.