True to its word the Federal Reserve raised its Fed Funds rate 25 basis points to 0.75 to 1 percent on March 15. The action wasn’t as disruptive to the commodity markets as it could have been given previous statements.
“What made the move by the U.S. Federal Reserve ‘Dovish’ was market participants anticipated three more rate hikes in 2017 and possibly indications that the Fed would shrink its balance sheet,” said Bobby Coats, professor of agricultural economics and agribusiness with the University of Arkansas Systems Division of Agriculture.
“But the Fed indicated their POLICY STANCE REMAINS ACCOMMODATIVE basically in all ways and presently planned only 2 more rate hikes in 2017.”
The day of the Fed announcement markets responded by stocks being up; bond yields were bullish with a lower yield; dollar weakness; and commodity prices in general rose on the news, says Dr. Coats.
“Market participants are not expecting another Fed Funds Rate hike until June 13-14, 2017 and maybe even not then, given potentially emerging global economic headwinds as the year progresses.”
To see Dr. Coats’ analysis of the current outlook for a number of markets, click on the attached.
Here’s the analysis accompanying this week’s charts:
Global government and Central Bank or global fiscal, monetary, trade and regulatory policy activities for the week of March 13, 2017 were bullish and re-energized the badly needed global reflation effort. Consider the following potential market impacts:
10-Year US Treasury Yield:
Slightly bullish with a potentially lower yield
Yield remains in a sideways range between 2.3 – 2.6
US Dollar Index:
More weakness than strength
Trading range between 95 -104
Building a base to move higher
Global macro forces in general remain supportive as global growth and reflationary forces continue to bear fruit
$WTIC Light Crude Oil:
Light Crude Oil is presently undergoing corrective price action, which will likely define a near term price floor
Fundamentals are bearish and Macro Forces are bullish
2017 – Likely primary range $40 to $60 with possible high in $72 area
Corrective price action underway
Soybean prices the week of March 20, 2017 need to hold above $9.92 otherwise $9.31 becomes a consideration.
Fed dovish stance March 15, 2107 and other factors likely supportive of the $9.92 price area; therefore a potential price move toward the previous June 2016 $12.08 per bushel high or higher is still in play
Corrective price action underway with the potential of achieving a price level of $4.11- plus per bushel remains in play
Given fundamentals, price will move in sympathy with grain prices and global economic momentum
Lagging demand increasingly problematic
Overplanting in 2017 given present fundamentals would provide added market challenges
Rice producers’ overriding consideration for 2017 should be managing for a quality grain kernel
Complex price action underway with a bullish price objective into the 84-cent area still remains in play. Past negative Fed verbal guidance and fiscal and trade policy considerations impact on cotton market prices appear to be subsiding
Corrective price action underway, but bullish price potential to $4.95 still a possibility
SPY SPDR S&P 500 ETF:
Consolidation period underway, corrective price action likely, but price trend remains up
QQQ NASDAQ Power Shares:
Trend remains up, consolidation period coming
EFA iShares ETF - Global Equities Excluding U.S. and Canada:
Building momentum and price strength
EEM iShares ETF, Emerging Market Equities:
Momentum remains positive