Fed Is Backing Off

The week has been extremely volatile. Stock markets went up and down as Janet Yellen admitted in front of the congress that the Fed would consider negatives interest rates but she was not sure “if it could be possible”. Uncertainties are definitely flying over the market and driving broad-based risk deleveraging. Markets are now pricing in the fact that central banks are questioning QEs effectiveness, while negative interest rates as a policy tool are gaining popularity. The Swiss Franc, a safe haven currency, has strengthened this week, despite some spooky trading, for the time being there is no rationale for SNB intervention. Yet, concerns over an appreciation of the Swiss currency remains lively. Banking credit and equity prices suffered also this week due to growing concerns related to derivatives exposure. With China away celebrating the New Year traders should expect further choppy trading when they return this week.

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This article is a guest blog written by Peter Rosenstreich from Swissquote