Those readers that have spoken with us over the recent past will know that our outlook is for the Fed to pause and that we feel there is an equal chance of a rate hike or indeed a cut as the next move in the Fed funds rate. We think the Fed will utilise their balance sheet rather than the fund's rate to add/withdraw liquidity during a period of high data dependency.

Finally, on 8th February Moody’s upgraded its Russian sovereign rating to investment grade.  The move takes the LT foreign currency rating to Baa3 (stable outlook) from Ba1 (positive outlook) and moves the rating in line with S&P who upgraded the rating in February last year to BBB- and Fitch who has maintained an investment grade rating (currently BBB-) throughout the 2014 sanctions and lower oil price period. Moody’s stated the main driver for the upgrade ‘is Moody's conclusion that the sovereign's vulnerability to such shocks has indeed materially diminished and no longer constrains the rating to sub-investment grade.

In my early days as a fund manager markets were only concerned with one data point; the trade balance. That was a very long time ago, and these days markets focus intently on payrolls and the unemployment rate which on the face of it suggest continuing strength in the US economy. However, it’s worth noting that the US unemployment rate hit a cyclical low of 4.4% in May 2007 and yet the US entered recession in December, just seven months later. That example alone should highlight that payroll watching is not really as insightful as some would have you believe.

Part II from a piece by our macro-economist Bob Gay:Should Financial Markets Celebrate Powell’s Pivot?

Two other developments might have given hawkish FOMC participants reasons to pause and reflect. For one thing, market measures of inflation expectations had declined significantly since the December meeting. This explanation, however, is not very persuasive because the Fed tends to rely on survey data on inflation expectations, which tends to be more stable than market measures that probably have been influenced by short-term developments such as the drop in oil prices.

This is part I of a commentary titled ‘Should Financial Markets Celebrate Powell’s Pivot?’ from our macroeconomist Bob Gay

At his press conference following the FOMC meeting of January 29-30, Fed Chairman Powell expressed the Board’s decision to be ‘patient’ in implementing future adjustments to its policy rate. The media immediately dubbed his statement as a ‘pivot’ away from the forced march toward policy normalisation over the past two years that steadily had raised the funds rate and had begun to shrink the Fed’s bloated balance sheet.