This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Nevertheless, of those few brave enough to trade equities ahead of tomorrow’s Fed comments, the majority seem to be of a bullish persuasion.
The increasing levels of inflation that the average UK resident is suffering look unlikely to improve in the short term. In fact, with the Bank of England continuing to have its hands tied, it looks likely that there will be little to reverse this trend. The US has also seen interest rates increase, but broadly this will be taken as welcome news by members of the FOMC. It is hard to consider any of this as more than foreplay ahead of tomorrow’s speech, at 7pm (London time), by Fed chairman Ben Bernanke. Equity markets were always going to have to wean themselves off the ready supply of cash that the quantitative easing process supplied.
America is further down the road to recovery than most economic regions, and therefore better placed to handle this news. Regardless of how many times ECB president Mario Draghi reiterates that the EU has turned a corner, equity traders have yet to see the economic data to back up these claims, and will be reluctant to believe Brussels without proof.
Tomorrow could well be a volatile day, as all eyes will be turned to the US.