It would appear that the markets are locked and loaded for a March 15th rate hike, with some players suggesting an increase in probability that there will be three hikes this year.
While the jury remains out on the direction of the US economy, comments from the Fed recently calling for higher inflation targets and more action to stimulate growth probably spark two lines of reasoning.
The Fed passed on hiking rates, but the lift to most commodity markets off that news was not very impressive, and this suggests that the path of least resistance is likely to remain down.
Recent talk of fresh easing from the BOJ and BOE seems to have been largely discounted as ineffective, and that has prompted a revival of safe haven interest in gold and US Treasuries.
Commodity markets are seeing nearly a perfect storm of bearish factors during the first 2 weeks of 2016.
In looking ahead to the coming week, we expect additional commodity pressure going into the FOMC meeting off of a stronger dollar in anticipation of an interest rate hike.
A much better than forecast look at October US jobs data has strengthened the chances for a December Federal Reserve interest rate hike.
With the Fed taking a pass on hiking rates in September, a reduction in their 2016 and 2017 growth forecasts, and only minimal dissension within their ranks against a steady policy stance, it appears that they are not confident enough in the pace of US growth to make a move at this time.
In the wake of the capitulation event a couple of weeks ago, global sentiment has continued to improve.