The dominant driver of market momentum in the preceding week was the Federal Reserve as the Open Market Committee opted to raise interest rates to 0.75%. Besides fueling a spectacular rally in the US dollar, the Central Bank upgraded its path for normalization, forecasting three rate hikes during the next calendar year. Adding to the optimism was the best consumer price inflation figures in two years. Other global central banks expressed their enthusiasm with both the Bank of England and Swiss National Bank highlighting the benefits of gradual tightening. Both the BoE and SNB left interest rates on hold at 0.25% and -0.75% respectively. However, each institution cited the ability to take monetary policy in either direction depending on how conditions evolve in light of the looming political and economic risk factors. In other news, Euro Area inflation continues to trend higher, reaching the highest point since April of 2014 for the aggregate area. China saw fundamentals continue to improve after a significant downturn, with both industrial production and retail sales back on the rise. Nevertheless, fixed asset investment continued to be a function of public debt creation, feeding concerns that the private sector continues to pull back on investment.
Fed Opens the Door Wider
Weekly Report - 18/12/2016