Japanese Yen (JPY) and Swiss Franc (CHF) Gain on Federal Reserve Forecast Move

December 15, 2015 - Written by Toni Johnson

STORY LINK Japanese Yen (JPY) and Swiss Franc (CHF) Gain on Federal Reserve Forecast Move

Global Equities Fluctuate ahead of Federal Reserve Interest Rate Decision

The wild gyrations in global equites markets which have marked the early part of this week’s session have continued today. London’s FTSE 100 shed over 2.0% of its value yesterday but has clawed back the vast majority of these losses during early trading today. Meanwhile, the euroland’s bourses have climbed by an even greater amount, with Frankfurt’s Dax jumping by almost 3.0% on the session and Paris’ Cac 40 enjoying a similar upward move.

The marked levels of uncertainty from investors is being driven by lingering doubts about the outcome of tomorrow evening’s US Federal Reserve monetary policy announcement.

Futures markets are, at the time of writing, pricing-in an 83.3% probability that the Fed will announce the first US interest rate increase in almost a decade tomorrow.

The fact that a sizeable minority of futures market participants still doubt that the Fed will be tightening policy creates an elevated level of jumpiness amongst investors.

VIX 'Fear Index' Peaked to Highest Level since October at 26.81 Today

Meanwhile, looking at other key indicators, the closely-watched VIX ‘Fear Index’ peaked to its highest level since the start of October yesterday, hitting 26.81 during late trading in North America. VIX currently trades at 21.08, highlighting the fact that market participants have recovered their collective nerve following yesterday’s near-capitulation in equities.

However, most analysts feel that a rate hike for the Fed tomorrow would be likely to send VIX sharply higher, with the measure’s multi-year peak of 53.29, which it reached during the final week of August, coming into play. Such an outcome would be likely to trigger renewed support for the safe-have Swiss Franc (currency : CHF) and Japanese yen (currency : JPY) against the other sixteen most actively traded global currencies.

Rising Crude Prices Positive for CAD and NOK Today

Elsewhere, today’s upward move for shares has coincided with a slight uptick in the global oil price. The move off yesterday’s multi-year low for the price of a barrel of Brent Crude Oil back towards the $40 mark has helped listed oil and gas companies and has also favoured the Canadian Dollar (currency : CAD) and Norwegian Krone (currency : NOK), both of which have recorded decent gains against the Pound.

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