Calm and cautious ahead of court decision

Calm and cautious ahead of court decision

By Ben Taylor (Sales Trader, CMC Markets)

Investors remain calm and cautious preferring to sit on their hands ahead of Germany’s Constitutional court decision and Thursdays FOMC meeting. The recent move higher in commodity prices and the expectation of further stimulus from the Federal Reserve has ensured that today’s pull back is limited in its nature before these key events.

Both these meeting will make or break this market and will be the true driver of direction over the next couple of weeks.

Most investors expect Germany’s constitutional court to approve the legality of the European Stability Mechanism buying distressed European bonds in the primary market. Unfortunately however there is talk that the verdict may be postponed after German politician Peter Gauweiler launched another offensive over the ECB’s potential unconditional bond buying operations.

It seems unlikely that Bernanke will stall further stimulus at the FOMC meeting on Thursday night following yet another disappointing employment read. A zero rate policy is expected to be prolonged and another quantative easing program could well be on the cards.

Today’s business confidence figure have made little effect on our local market. The fall in confidence was expected and is a direct result of recent falls in commodity prices from a slowing China. The slowdown is continuing to claim victims in the mining community as the boom fades with numerous coal and iron ore projects being shelved as prices fall.

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