The usual apprehension before a Fed meeting seems to have been shrugged off even though the end of its quantitative easing program is a dead cert. The end has been widely telegraphed but it is the implicit ‘deal’ that has been struck between markets and the Fed where the risks lie.
In exchange for pulling the plug, markets will need to get something in return or they could throw another taper tantrum. So, traders are getting bullish positioning themselves long the market in anticipation that the Fed will be extremely dovish with its forward guidance to prevent the bottom falling out of the market. The US consumer confidence data surpassed estimates keeping investors optimistic regarding the economic growth.
Additionally, corporate results impressed the markets again overshadowing lower than predicted growth for home prices. So, the Dow Jones continued its rebound from under 16,000 reached two weeks ago, gaining 170 points yesterday to close at 17,008. It has been reported that reluctance in the euro zone to use QE when faced with the risk of deflation/ recession has attracted record outflows. But on the other hand the US is recognizing that Europe could pull the world biggest economy back into trouble as well so it appears to be having second thoughts on raising rates. That seems to have stopped (for now ?)a free fall in the euro which yesterday recovered 34 pips against the greenback to 1.2735.
Renewed optimism about the US consumer was a breath of fresh air for oil prices with the WTI posting a 93 cents rally to $81.59 a barrel. However, weaker oil demand is a reality and the success of the US fracking could make it hard for the current trend to restart its upward trajectory in the immediate future. Before the conclusion of the Fed meeting, gold prices gained $2.6 to $1228.4 amid reports that Turkey and Russia were in the market to add bullion to their reserve. The precious metal is still struggling to post a meaningful recovery after recently falling below $1200.00 mark.