Equity markets continue to trade cautiously in the wake of last week’s decision by the Federal Reserve to hold interest rates at current levels. Both European and US markets regained a little bit of equilibrium after Friday’s sharp down moves prompted concerns that the US central bank had significant worries about events in China A number of Fed policymakers have been out hitting the wires in the last few days pouring oil on troubled waters articulating their view that a rate rise this year will still happen, and that for now caution is required given the volatility seen in recent weeks. While St. Louis Fed President James Bullard indicated he would have dissented to last week’s decision he has never been a reliable voting bellwether in the past, given he called for a rate rise in 2013, only to subsequently change his mind. More importantly he’s not a voting member this year so his opinion doesn’t really matter that much at the moment, though that will change in 2016 when he does get a vote. Mr Bullard also indicated that it was “inappropriate” for the central bank to react to financial market turmoil which is a nonsense argument given that it was exactly the Fed’s actions in 2009 that managed to put a floor under the implosion of stock markets in 2008, when it embarked on its massive QE program. On the other hand Atlanta Fed President Dennis Lockhart is a voting member and in August he stated that a decision not to hike rates in September required quite a high bar. In comments yesterday he justified his decision to step over that bar by saying that last week’s delay was “prudent risk management” and that while he was not entirely confident about inflation, he remained confident that a rate rise could still happen this year. Another proponent for a rate rise this year was the San Francisco Fed President John Williams, who said last week’s hold was a close call and that he still expected a rate rise this year. European markets look set to open slightly higher again despite a rather choppy session yesterday as investors look ahead to a fairly quiet week of data, though we do have some China data later this week which could precipitate some market volatility, while events in Greece appear to have settled down for now that the comeback kid Greek PM Alexis Tsipras has been re-elected with a refreshed mandate, though the crisis here is merely snoozing given that nothing has been resolved with respect to Greece’s finances. The debt restructuring question still remains unanswered while the Greek banking system still remains largely insolvent, kept alive by ELA liquidity, while new bailout taxes are likely to suck the life out of what’s left of the wider economy, and that’s before we even start talking about pension reform, which has acted as a significant log jam at every previous negotiation. In the UK we have the latest public sector borrowing numbers for August with a return to deficit expected of £8.8bn after a surprise surplus of £2.1bn in July. With wages continuing to rise much faster than inflation the hope is that this deficit will continue to come down over the next few months. EURUSD – the euro continued to remain weak yesterday dropping below trend line support from the August lows at 1.1220, in the process reopening a move towards the 50 and 100 day MA at 1.1125-50. While above these support levels the risk remains for a move back towards last week’s highs and then on towards 1.1700. GBPUSD – the pound dipped back towards the 1.5470/80 area yesterday, and could well fall further in the short term despite making a new 3 week high at 1.5660 last week. We still remain on course for the August highs at 1.5820, but could slip back towards the lows last week at the 1.5330 area. EURGBP – having broken below triangle support at 0.7245/50 opens up the prospect of a move towards the 0.7100 level. Only a rebound back through the 0.7260 area negates this prospect, and argues for a return to the 0.7320 area. USDJPY – trading in a broad triangular consolidation with triangle line resistance at 121.00, and support at the 119.15 area. The US dollar still looks vulnerable to a return to the 116.20 area seen a few weeks ago but for now appears to be range trading between 118.50 and 121.50. CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.