The last trading days before Christmas have been a major anti-climax. The Fed rate rise had a minimal immediate effect on the markets: the volatility that many expected failed to occur. The wilder speculation about capital flight from emerging markets has so far been proved wrong. Indices in Indonesia and other emerging markets saw small gains in the hours after the decision.
Janet Yellen has pursued a policy of relative transparency, almost easing the markets into the new financial course. She has also placed herself under no obligation to commit to further rises. It is likely she will continue to try to steer the US economy with a subtle hand in 2016. Any further rate rises will probably be small and the markets will get plenty of advanced warning.
Oil prices have continued to fall, with Brent crude hitting an 11 year low early yesterday morning. Predictions that it will fall to $30 a barrel are looking more plausible every day, but reaction has been muted, with markets showing relative indifference to low prices. The US is now set to begin exporting crude after a 40 year ban. It is unlikely to export significant quantities in the short term, but the decision may give a boost to its fracking industry.
In the last few days before Christmas, it will take a major surprise to generate any big financial news before January. One of the few current uncertainties is the People’s Bank of China and its plans for the renminbi. The bank has just ceased to weaken the currency, pausing a downward trend that began during the build up to the Fed decision. There has been speculation that it is planning a wider devaluation but there seems to be few hard facts behind these rumours.
Jonathan Dayan is vice president, trading at eToro.