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Is the Fed set for a “dovish hike” this week?

As we have moved into a massive week for financial markets, sentiment may have bounced initially but it comes from a low base amidst the battering that markets took last week. The ideal market conditions that Janet Yellen and those hawkish voters on the Federal Open Market Committee must have been dreaming about as the Fed was getting ready for the first interest rate hike since 2006, are simply not in place. In September the Fed gave the markets a rate-fake as markets were taking a bath amidst concerns over China. This time around the oil price is falling off a cliff and the hawks have got a massive decision to make. Will it change what the rhetoric has set the markets up for? Surely the FOMC will not perform another rate-fake. I discuss how markets are set up moving into the Fed meeting and how I believe that the Fed will move. I also show what are the other key economic factors that could impact on markets in the final full week before the Christmas holidays period.

Across the forex markets the outlook has been impacted by a flight into safe haven plays, so who are the winners and who are the losers in this situation? I take a look at the technical analysis outlook for Euro/Dollar and also Sterling/Dollar. The sharp increase in the VIX index reflects the increasing concern in the equity markets. The FOMC decision will certainly impact this week and I discuss how this may play out. There is also a technical analysis of the DAX and the FTSE 100. The weakness across the commodities complex has had big implications for financial markets but what is the outlook ahead of the Fed?  I also take a technical analysis view of gold and the chart of Brent Crude oil.

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