MARKETS: FOMC fails to provide confidence in global economy

The Fed’s decision and lack of commitment towards when it will actually begin raising US rates is going to greatly threaten USD investor appetite, meaning further pressure will be added to both the Bank of Japan (BoJ) and European Central Bank (ECB) to add further stimulus and prevent investors from purchasing their currencies. It also appeared that the Fed swerved away from their previous commitment that a rate hike would be data dependent, meaning that global developments are a major concern for the US central bank and that the USD will now be exposed to pressure each time fears over global growth resurface.
The indication from the Fed that global economic weakness played a major factor in delaying a rate rise strongly weakens the possibility of an interest hike at all this year. Global growth concerns are a reoccurring theme as current suggestions strongly point towards economic momentum in China continuing to slow even further next year. Both the BoJ and ECB are going to find themselves under increasing pressure to reinvigorate economic momentum, and the emerging markets remain vulnerable to further weakness. The EM currencies failed to bounce as strongly as some would have hoped as the Fed left interest rates unchanged, indicating that it is depressed commodity prices and slowing trade from China that are the major threat to sentiment towards these currencies rather than capital outflows that have already started taking place.
Gold: The USD weakness following the Fed rate decision provided positive momentum to Gold and allowed the metal to climb to a two-week high at $1134. Hesitance from the Federal Reserve to begin raising US rates improves the prospects for Gold, however expectations need to be pushed back beyond this year for the metal to truly rally and regain losses from early this year. There are clearly ambitions from the Fed to carry out their repeated pledge throughout the past year to begin raising US interest rates in 2015, which is why I am not quite yet bullish on Gold.
WTI: The US marker crude failed to gain momentum despite the USD weakness on Thursday night, which is linked to the Fed outlining global growth concerns as a major reason behind rates being left unchanged. While the commodity managed to break out of its wedge pattern earlier this week on the surprised decline in inventories from the United States, an incredible oversupply in the markets remains and will limit how high WTI can rally. Not only will the aggressive oversupply limit gains for WTI, but global growth concerns will lead to increased expectations that demand for the commodity is going to reduce, and this will act as a major catalyst for the price of WTI to remain depressed.
GBPUSD: Sterling-dollar has rallied strongly over the past couple of days, with the gains in UK wage growth providing investor sentiment towards the Pound with a huge boost. The advance in wage growth raised investor sentiment because this will increase optimism that this will be passed on to inflation pressures and lead to an improvement in UK inflation data moving forward. The GBPUSD is technically looking very positive, with the pair surpassing its 200, 100 and 50 Moving Averages over the previous two days with this improving the prospects of the GBPUSD carrying through its recent gains into next week.

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