Market Overview

29 January 2016

WEEKLY REVIEW: Will the Fed delay its interest rate hikes?

The Fed kept its interest rate unchanged this week as widely expected by analysts. The Fed said that the U.S. economy is expected to continue to expand moderately, while the U.S. labour market is expected to continue to strengthen. But the Fed noted that developments abroad could have a negative impact on the U.S. labour market and inflation.

Today's U.S. gross domestic product (GDP) and personal consumption expenditures (PCE) price index showed that the economic growth and inflation pressures slowed in the fourth quarter. Other economic data remained mixed.

It is likely that the Fed will not hike its interest rate at its March meeting if the U.S. economy will not accelerate.

Oil prices remained volatile this week. Oil prices recovered as market participants speculated that top oil producers could cooperate and cut their oil production. But OPEC denied that, but noted that it is ready to cooperate.

Concerns over the global oil oversupply are likely to continue to weigh on oil prices as Iran's oil output rose and the country plans to continue to boost its output.

The European Central Bank (ECB) is likely to be in focus in the coming weeks. The ECB President Mario Draghi hinted at a press conference last week that the central bank may add further stimulus measures at its meeting in March as downside risks rose.

The Bank of Japan's (BoJ) Friday lowered its interest rate for the first time ever to -0.1% from 0.1%, adding that it could cut its interest rate further if needed. Analysts did not expect this decision.

The start is done this year. The ECB could be the next major central bank that will add further stimulus measures.

It is likely that the currency pair EURUSD will rise toward the resistance level at $1.1000, if the U.S. economic data will be negative or there will be negative news from China and no negative news from the Eurozone.

If the U.S. economic data will be positive and in case of the negative news from the Eurozone, the currency pair EURUSD may test the level at 1.0700.

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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