This week is like a typical action movie - it begins with important, but not that striking events to gain momentum in time. First signs of the thrilling atmosphere will be earnings of McDonald's and other big names, but on Wednesday, it's the time for the first possible game-changer this week - the Fed interest rate decision. We reached out to Michael Hewson, Chief Market Analyst at CMC Markets, to discover his point of view, as for the first time since summer, the Fed rate hike of 25bp is indeed cemented. Is he of the opinion there will be no real market reaction though?
Michael Hewson (CMC Markets): I am surprised at how complacent markets are about this weeks Fed decision - there seems to be this view that the Fed is close to signalling a pause like the Bank of Canada last week. If anything, the recent US data suggests that the Fed could easily get away with another 50bps move which is something I think they should do. With the Nasdaq 100 up over 11% year to date, financial conditions are too loose with the market pricing in rate cuts by year end. We are a long way from signalling that the fight against inflation is done and could see a hawkish surprise this week, especially if Powell pushes back on recent moves in bond and equity markets.
We also asked Michael about the situation on the British market.
FXMAG.COM: Despite turbulent times of British economy FTSE 100 is close to reach new all-time high - what could be the effects of BoE interest rate decision on Thursday?
Michael Hewson: There is unlikely to be much effect from this week's Bank of England meeting on the FTSE100, given that most companies in the UK index do the bulk of their business overseas.
