US Fed minutes reveal little change, oil steady, global equities higher despite Greek bond yields rising, ASX futures up 25 points

The US Federal Reserve released its December minutes at 6am this morning. It really did little more than shuffle some wording about and this had almost no effect on the level of the US dollar index, as you can see from today's first chart. The minutes are taken from the policy meetings that occur eight times per year, and the two best free resources to use to monitor Fed statements that come from these meetings (next of which will be made on 28 January) and their effects are:

  1. Wall Street Journal's Fed Statement Trackerhttp://projects.wsj.com/fed-statement-tracker/. Use this to analyse the changes made in statements from the Fed from meeting to meeting, as they are released. (NB: these are the post-meeting policy statements, not to be confused with the minutes.)
  2. FedWatch by the CME Grouphttp://www.cmegroup.com/trading/interest-rates/fed-funds.html. This is a very handy tool for gauging the market's anticipation of official US rate movements and the percentage changes that are being priced into futures. Click through the dates (which represent Fed policy meeting dates) and get to understand when and how the market is pricing in the chances of a US rate rise. You'll see by clicking on the September month that this is the first time a probability greater than 50% appears.
If oil markets quieten down, this theme of the market remaining glued to the US Federal Reserve's statements and trying to anticipate what will change in interest rate markets will come back to the fore. Oil markets are strongly linked to interest rate markets at the moment, due to the fact that the dramatic falls in oil prices are having a downward effect on consumer price growth, and all central banks use consumer price inflation as a gauge of when to raise or lower rates. What's more, the longer oil price remains anywhere between US$40 and US$70, the more obliged manufacturers will feel to pass on their lower energy input prices, and this could represent a a second-round of oil-related disinflation. So I really think the Fed is kidding itself in priming the market for a mid-2015 rate hike. And the net effect of lower oil prices for the US should be a theme in 2015 of increased consumer discretionary spending, which might point the Fed toward a 2016 rate hike. Nonetheless, 2015 will extend an era where the world's largest economies continue to hug zero interest rate policies.

Locally, the Reserve Bank of Australia board members are really going to follow suit with the US here. They're happy with an Australian dollar lower than where it is now, they've witnessed a bit fall in Australian consumer price growth and we'll be seeing the release of December 2014 quarter CPI on 28 January. As at yesterday, the market is pricing in a 78% chance of no change and a 22% chance of a decrease to 2.25% for Australia after the next RBA board meeting on Tuesday 3 February. This will continue to make investing in risk assets a key theme for the bulk of Australia's baby-boomers, who will not be getting anything exciting back from savings accounts and term deposits for some time. So we remain in the space of finding quality yield in this equity market for Rivkin Local members, and this is going to be a busy hunting ground for some time to come.

Today’s charts are taken from the Rivkin Trader platform. 30,000 global instruments available to trade including FX, commodities, index, ETFs and international shares. Trade Australian share CFDs from just $8 or 0.10%. Click here or phone 1300 748 546 to get your free $100,000 demo account.

Upcoming economic announcements: Japanese foreign asset purchases 10:50am, Eurozone economic confidence 9pm, Bank of England rate decision at 11pm (no change expected), all Sydney time.

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