Keeping It Steady

Today we'll see if the FOMC decision knocks the EUR/USD out of its 1.29-1.30 range. Market expects them to keep interest rates the same but the focus should be on what inflationary pressures may be out there.

The following are my big 3 inflation factors:

1. We are currently facing a rebound in oil prices with colder weather, however oil prices are still moderate and I wouldn't expect any big hikes without OPEC or oil reserve data.

2. After a big cooldown of the housing market in 2006, this year it appears prices will be moderate.

3. Wage inflation and Democratic party talk of higher minimum wages, this Friday's NFP numbers will also factor in inflation considerations.

IDEA: It would be interesting to chart weather temperatures and study their recent correlation with the markets.

We'll see what hits the wires around the 2pm EST FOMC decision...

I Like It When Things Get 'Interest' ing

It's boring when expectations are always met. But it looks like the Japanese don't mind making us jump from our seats. Interest rates decisions are probably the announcements that least digress from market expectations. That's why analysts play such close attention to subtle changes in wording... any hint towards the next rate decision or change in monetary policy.

However, the Bank of Japan gave us some fun yesterday as they decided to keep interest rates the same. The market was expecting another .25 hike to .50 but instead was kept the same for fear of slow economic growth. This might make trading JPY interesting as using it as a carry trade strategy can still be a good idea. In contrast with the European Central Bank who are implementing steady hikes, the BOJ may be very well content with sporadic hikes and lengthy pauses in between. As the interest rate for EUR raises at a speedier clip than BOJ, the EUR/JPY currency pair can make for a very interesting long-term strategy!!