Finally, a bit of volatility in the markets

Today's highlights

Finally some action

Oil Inventories

FOMC Minutes

Please note: All data, figures & graphs below are valid as of August 17th. CFD trading carries risk to capital and losses can exceed deposits.

Overview

Finally, we have a bit of volatility in the markets. The VIX volatility index closed the day at 12.64. Not a huge reading but certainly better than we've been getting over the last week.

As per the usual patterns lately, when volatility ticks up, stocks tick down. The markets in Europe and the US didn't do too well yesterday. Just about everything dropped by about a quarter percent.

Asian stocks are green so far and are fighting to hold on to profitability today.

Crude

Crude oil is up another buck, now at $47 a barrel. This gives a bit of confidence that the markets could be Ok., If oil is holding on, or at least not crashing, it's time to celebrate.

Many of you will remember that Oil's slide under $30 at the beginning of the year caused massive uncertainty and a sell-off in the global stocks.

This afternoon we'll get the weekly tally of crude oil in the USA. Analysts currently expect that there are 300k more barrels of crude than there were last week.

A negative number could be good for the price as it would indicate less supply, and therefore more demand. A number higher than 600k could spook investors who are already nervous about the global over-supply glut.

What about the FOMC?

Late in the afternoon in the USA the Federal Open Market Committee will release the minutes from their last meeting. The Fed has been a tough cookie to read lately.

With the Jackson Hole Symposium still about a week out, we have different Fed members saying different things entirely. Some members, like Dudley and Lockhart are saying that it would be a great idea to raise rates again this year, possibly even twice.

Meanwhile John Williams is saying something completely controversial. He's saying that the Fed should actually raise their inflation target from 2%, or even get rid of the inflation target all together and instead concentrate on other metrics like growth for example.

Pushing out the inflation target makes sense on a few levels. First, it would allow them to keep the rates lower for longer. So even if the US overshoots the 2% inflation level, the Fed wouldn't be cornered into raising rates too quickly, currently their biggest fear.

Second, it would relieve pressure from the Fed. They've had this 2% target in place for quite a while now. Despite their best efforts, we're only seeing 0.8% at best.

What's the trade from all of this?

The play is on the buck of course. Check out the US Dollar reacting to the Fed.

The Blue Circle is the market digesting William's comments about the inflation target. The Yellow circle is when Lockhart and Dudley started talking up another rate hike.

A very valid and excellent point Ray! Let's see what happens to this circus once the ringmaster weighs in.