Fed set to put brakes on March rate rise (+video)

Tonight we have the US Federal Reserve Meeting (FOMC), and it’s widely expected that it will keep interest rates unchanged. The communication of the statement following the meeting will be eyed very closely and the market will be looking for signals of the Fed’s next move.

Given the collapse in the oil price and the current global financial turmoil it is anticipated that the Fed will deliver a more dovish tone and look to skip March as the month for the next rate rise. The markets have already priced in the expectation that the Fed will need to tone down the pace of its rate-lift cycle. If the statement fails to get this point across, the US dollar could rally further.

Price of milk sours RBNZ on making changes

Tonight we also have the Reserve Bank of New Zealand (RBNZ) meeting where, again, interest rates are expected to remain unchanged (at 2.50%). In a similar tone to the US FOMC, the RBNZ could turn more dovish as it looks to weaken the New Zealand dollar. The RBNZ will also be concerned about the recent weakness in dairy prices.

Carney’s negativity priced in

Bank of England Governor Mark Carney again addressed the markets yesterday. It was no surprise to see Mark Carney reiterate his dovish tone and reaffirm that interest rates are not set to rise anytime soon. However, the pound shrugged off the comments and performed well on the day, improving against the US dollar and the euro. The market was well prepared for Mr Carney’s negativity, and there is growing consensus that the pound sell off has been overdone.

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