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The fall in volatility, as encompassed by the VIX, was evidence of the fact that this was a perfectly stage-managed event which, despite providing very little for doves to get too excited about, still saw indices rally.
Today marks the beginning of a new phase for the Federal Reserve whose new norm will be about raising rates rather than maintaining them.
It is also a sea change for market participants who will now shift their focus onto pastures new instead of being so transfixed on that first hike which many perceived as the primary market risk.
There is a tangible feeling that this could mark the beginning of the so-called Santa rally, but fears remain over the impact that a strong dollar will have upon commodities prices and subsequently FTSE valuations.
The typical theory that monetary tightening leads to indices weakness and currency strength appears to be somewhat detached from reality currently, with dollar strength matching the rally in stocks. How long we will see this positive correlation last remains to be seen.
Unfortunately despite the Fed hike being out of the way, we are likely to still see economic data treated inversely, where good data leads to weakness. This was seen in this morning’s UK retail sales figures, with the sharp FTSE selloff following what was stellar batch of economic data showing that Bank of England thinking remains at the forefront of the market mindset.
Ahead of the open, we expect the Dow Jones to start at 17,763, up 14 points from Wednesday’s close.