As we come to the end of a choppy but positive week and the last full trading week of 2015, European equity markets still remain well below their highs for the month, despite the rebounds of the last three days, and could well be rather choppy day with options expiries due today. While Wednesday’s Fed rate hike removed one cloud of uncertainty from the markets thinking in 2015, speculation about when the next one is likely to occur is not expected to remain too far away, given the divergence between what policymakers expect to occur one year on from here, on their dot plot expectations, and what investors expect to happen. This is likely to be the Fed’s next challenge given that no one in the markets seriously expects US rates to be anywhere near 1.375% a year from now, which would imply four rate hikes, one at every meeting with a press conference. Given that two of those press conference meetings book end next year’s Presidential election, it is highly unlikely that the Fed would move on rates in the lead up to such an event. The US dollar appears to be working on the basis that this week’s hike is not likely to be the last, as the greenback surged across the board yesterday with commodity prices falling back sharply, once again reinforcing concerns about deflationary pressures, while the Chinese currency continued its decline to fresh 5 year lows. The initial stock market relief rally in the wake of Wednesday’s Fed decision rapidly turned to dust in the US last night, after European markets had closed as a renewed plunge on commodity prices threw US markets into reverse gear, with crude oil prices headed back towards their multi year low of earlier this week. Sentiment wasn’t particularly helped by the fact that the latest data from the US manufacturing sector pointed to a renewed contraction with the Philadelphia Fed manufacturing survey for December, coming in at -5.9. The pound also slid sharply despite a stellar set of November retail sales numbers which suggested that UK consumers are feeling less constrained than was the case earlier this year. The strength of the rebound in consumer spending was all the more surprising given a disappointing October and the unseasonably warm weather we’ve been seeing which is likely to have curbed the more seasonal aspects of consumer habits with respect to the purchase of cold weather clothing. Certainly on-line Black Friday sales played their part, and with inflation still near zero and wages rising at 2% the December numbers could well be equally as positive. A rise of 1.7% in November, bringing the annualised rate to 5% brings into sharp relief the reluctance of the Bank of England to consider a modest rate rise, at a time when US retail sales are rising at 1.4% and the US Fed has just raised its own benchmark rate. Bank of England governor Mark Carney said earlier this year that the prospect of a rate rise could well come into sharp relief early next year, and now that the Fed has moved, the Bank of England undoubtedly has much more wiggle room than it did earlier this week, and with the governor taking looking likely to take up his option to stay on the full eight years, we can probably look forward to a lot more misdirection in the coming weeks and months. EURUSD – the euro continued its fall back towards 1.0800 yesterday, and does look a little vulnerable to further losses in the short term. A move below 1.0800 could well see a move back towards 1.0620 undermining the prospect of a return to the 1.1000 area and retest of the 100 and 200 day MA at 1.1050/60. GBPUSD – yesterday’s fall below 1.5000 was unexpected and we could well see further losses if we break below 1.4850, with a move towards the lows at 1.4565 a possibility. The pound has declined four days in succession and needs to recover back through 1.5000 to stabilise. EURGBP – the 0.7300 area and 61.8% retracement of the entire down move from the October peaks at 0.7495, and the November lows, continues to be a tough nut to crack, while the 0.7200 level and the 200 day MA is a key support. We need a break either way to determine the next move here but the bias could be lower. USDJPY – the move back through the 122.20 area opens up the prospect of a move back towards the 124.00 area. It would take a move back through 122.30 to reopen the prospect of a move back towards the 120.00 area 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.