Richard Perry
Independent Analyst
There has been a strong reversal of sentiment in the past 24 hours. Equities have sharply fallen whilst the dollar has come under some corrective pressure. It will be interesting to see if this is just a near term blip or something bigger. There are two catalysts that could play a big part in this. Firstly amidst a pretty dour earnings season to date in the US, Apple has recorded a somewhat remarkable set of quarterly results (much of which has been driven by soaring demand for its products in China which was up 70% on a like for like basis). The knock-on impact this could have on the markets could be significant. Although Wall Street closed with sharp losses, Asian markets were broadly flat to slightly higher and European markets have started higher too.
The other factor is the Federal Reserve meeting today which culminates in a statement on monetary policy at 1900GMT. With central banks around the world almost queuing up behind one another to deliver dovish shifts (the central bank in Singapore was the latest to ease monetary policy overnight) all eyes will be on the FOMC to see what they come out with. There is an expectation of no major change to the statement although the usual debate over the wording of the length of time the FOMC will hold rates at record low levels with “patience” and “considerable time” still featuring. However if there is a subtle shift to a more dovish tone, in light of the oil price and global disinflationary pressures, then there could be a significant dollar correction and a short squeeze on pairs such as EUR/USD.
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