This week is going to be an interesting week, not just because it’s ADP and non farm payroll numbers come Wednesday and Friday, more importantly, it’s a ‘hazing’ week by the many FOMC members who will be talking in the media from Yellen, Fischer, Williams, Dudley, Evans, Bullard and Kocherlakota.
Since, we all know to be American is to be able to stay what you feel and think, there will ultimately be a confusion of views and opinions. We already know that there are some FOMC members who are pushing for raising interest rates and there are those who want to push-off a rate hike till later.
Former Secretary of the Treasury, Larry Summers is advocating a rate hike only in 2016.
Earnings in corporate America is flat, equity prices fueled by high P/Es, thanks to cheap monies. Same situation in China but only worse, why, because the government is fanning the bubble in the equity markets.
People are saying that Janet Yellen is being ‘wishy washy’ in her decision whether to raise interest rates or not. Her recent remarks in the past FOMC rate decision showed that she is acknowledging the various economic problems faced by the many different countries all over the world. More importantly, because the USD is the main economic trading currency, any hike in interest rates will make the corresponding currencies in South America, emerging Asian countries look like ‘banana’ monies. As it is, Indonesian rupiah and Malaysian ringgit is trading at all time lows. The Brazilian real has collapsed and is poised to fall further.
Trade flows and money flows around the world among countries are so intertwined that it is near impossible for the United States of America to ignore the implications of its monetary policy on global currency markets and trade countries.
Since post FOMC, the USD has been strengthening against all majors and is killing emerging currencies. I attached the Fibonacci charts for GBP, EUR and AUD.
Looks like the majors are all trading at their low ranges, below or about at the 23.6% level. This could mean a possible bounce back up against the USD if there is any negative noise about the USD. And with so many FOMC members talking this week, volatility could potentially rise.
Let’s see.
Let’s all stay on our toes, shall we?
The Panthenon Investment Group 