Higher Interest Rates Ahead According to FOMC

Weekly Report - 23/03/2015


The impact of the latest FOMC Statement sent reverberations across global financial markets. Aside from the dramatic saga playing out in Greece, fears about the economic recovery continue to weigh on commodities. Quantitative easing continues to drive valuations of equity indices higher despite the backdrop of weaker earnings and revenues.

Last Week in Brief

US manufacturing data continues to disappoint analyst expectations, and with the Federal Reserve maintaining that monetary policy will be “data dependent”, this is a setback for investors anticipating higher interest rates. While employment was the one highlight underlined by Fed Chair Janet Yellen, headwinds to the economy include weak inflation and a stronger dollar which has been a hindrance for exports. The statement sent the dollar tumbling against peers and commodities soaring, led by the move higher in gold. Precious metals prices remain elevated and energy prices saw continued gains as a technical rebound in crude oil prices offset higher than expected inventory gains and expanded production. Meanwhile the ECB has stepped up preparations for a Greek exit but is nevertheless struggling to meet its ambitious quantitative easing targets.


The Week Ahead

The US economy will be front and center in the coming week with the final release of 4th quarter GDP the main event at the end of the week. Aside from economic growth measures, the US will see an abundance of housing data with the announcement of existing home sales and new home sales. Durable goods orders will also give a good indication of the investment climate in the real economy. Inflation readings will be issued by both the US and UK. Of no less importance is manufacturing data set to be revealed by Germany and the Euro Area in aggregate. The German IFO Business Climate index is likely to provide further evidence of the outlook for the Euro Area export machine as growth remains below trend and unemployment is on the rise.


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