Daily Market Commentary 27th January 2022

US Equity markets rallied ahead of the Federal Reserve interest rate decision. The Fed is expected to leave rates unchanged, but may discuss the timing of rate rises and the abolition of QE, perhaps considering contracting the Fed’s Balance Sheet. The Bank of Canada decided to leave rates unchanged, with the latest COVID explosion an excuse to ignore rampant inflation, indicating interest rates may rise in co-ordination with the Fed in March. The S&P Case Shiller Home Price Index fell, while weekly mortgage Applications contracted 7.1%, casting a shadow of the important leading sector of housing. US Bond Yields held below 1.8%, while the US Dollar remained steady, in quiet trading before the FOMC rate decision. The EUR traded below 1.1300, while the GBP held 1.3500, keenly awaiting the outcome of the Fed’s decision.

Commodity currencies also bided their time, with the NZD trading 0.6670, while the AUD broke back above 0.7150. These rates will also rely upon the impact of the Fed on bonds, interest rates and commodity prices. The Ukraine situation has calmed down, with Ukraine and European officials downplaying the crises and blaming the US and UK for the rise in tensions.

All eyes remain on the Federal Reserve and the Q&A, in the post meeting press conference.