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February 11, 2016 - Financial Markets Forecast Outlook
Yellen on the Stage While Markets Benchmarking Her Outlook By AvaTrade
Trading the News Profitably
European markets are ready for battering once again and it seems like investors do believe that they can squeeze some more profit out of this trade by going short. If you look at the manufacturing and industrial data released throughout this week for Europe, it will become audible that the growth picture has crowded even further. This has augmented more tenacious challenges for the ECB to spur growth in the region. Their recent measure of negative rates has run out of its course and it is likely that they may have to dig deep to bring some other tool to fortify any growth in the region.
The European bank stocks rallied yesterday and it was dubbed that the next tool to restore confidence from the ECB could be buying these bank stocks as they have run out their option. If you envisage that is not in the mandate of the ECB, then look at the People Bank of China, which started to buy the equity market to provide abutment. Therefore, such rumors even though, seem completely bizarre, but have strong legs to stand if you just look through a different lens.
Inflation and growth, both have become immensely flimsy and the ECB has confirmed that they will not be shy off to use the conventional and unconventional tools to ignite growth for the region. Therefore, it will be wrong to cogitate that the ECB cannot take certain steps because it is not within their mandates.
As for the oil market, some traders are still hopeful that perhaps another leg of constructive arguments can lead to production cuts. Hope is a very cunning element, but yet something that you do not want to live without it and this is what oil traders are betting on. The frailty in the price seems to have overtaken once again, but the odds are rising that perhaps these rumors may become a reality and if they do have any truth to them, the bounce in the oil price may be well beyond the expectations which many are hoping. Therefore, it is significant not to turn deaf ears to such rumors but be vigilant.
Miss Yellen, the Fed Chairwomen, came under the harsh questioning of officials, but she surely did a stellar performance. On balance, her comments were dovish, nonetheless, she maintained the balance by throwing some hawkish and upbeat comments for the US economy. Traders have perceived her message mostly as dovish and have contemplated that another rate hike is not under sight anytime soon given the circumstances. The Fedís decree of incrementing the rate hike has produced one commendable affair, which is they have reloaded their bullet chamber and now if the economy does derail and deviate prodigiously from its current path, the Fed has something which can fire and worked in the past.
However, she has shown much resilient to the idea of negative rates, but once again her answer was immensely muddy and this is what she will be questioned again today- her second day of testimony. Global growth along with domestic matters will be something what traders like to know what she has to say more and most of the questions will be tailored accordingly. If she wants to restore the confidence in the market she needs to make it acute that the Fed will only raise rates only once or twice and perhaps that could calm this rout. The Fed committee needs to admit that the dot plot is a complete failure and it will not be something which can be followed.
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