US Futures Higher Ahead of FOMC | EZ CPI Data Spooks Markets

The US mortgage application index for the month of December took a nose dive. This confirms that investors do not feel that much comfortable in rising interest rate environment – a sign of lack of confidence among consumers. But the element which the investors are closely watching is the upcoming FOMC minutes. They want to know if the Fed is going to shed any light with respect to tax reforms and fiscal spending, which Donald Trump has promised.

We do believe that the minutes may show very neutral and flexible approach as the Fed do not want to give the wrong signal to the market. Having said that, it is equally important, that the Fed guides the market that they have the right tool to handle any situation

Over in Europe, the headlines have been dominating today with the Euro Zone’s economic data and this has raised many questions for investors. The CPI data has shown exceptionally strong reading and this is going to get the blood pumping among hawks who sit on the ECB board. The bank has kept its monetary policy ultra-loose because of lower inflation and rise in fuel prices have started to push the inflation number higher.

The question is how much the ECB will have to rekindle their asset purchase program if inflation data continue to improve at this pace. This has spooked some investors over in Europe and the euro has also shown some strength against the dollar.

Naeem Aslam
Chief Market Analyst
Think Markets UK Ltd

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