Market no more wary over US Federal meet; Brexit takes charge

Even as the US Federal Reserve is scheduled to announce the outcome of its two-day policy review later on Wednesday, the market seemed more concerned over Brexit vote, an event that is still eight days away.

Fed rate hike bets have seen a sharp fall in the past few months, as the economic data, especially on the jobs front has failed to go along with the recent hawkish comments by Fed policymakers. Dalal Street too seems to have shrugged off rate hike worries and how!  

Data suggests that this is the third time when the BSE benchmark Sensex has offered positive returns in a period between two Fed meets. This compares with just two times the index has returned positive out of preceding eight policy meets. The 30-pack index has returned 1.5 per cent since its two-day policy review that concluded on April 27.

The index had returned 5.60 per cent between March 16 and April 27. On March 16, the Fed had refrained from hike interest rate. The index was up 0.78 per cent between the Fed's January 27 and March 16 meeting. The period saw jobs data weakening and global uncertainty rising on account of volatile crude prices and chances of Britain leaving the European Union.
 
"Nobody expects Fed will hike rates at this meeting, largely because of the very weak performance of the jobs market in May. For months, the Fed has said that once economic data showed a consistently healthy economy, it would be time to resume raising interest rates," said Dhruv Desai - Director & COO, Tradebulls.

However, Baliga believes more than the US jobs data, it is UK referendum that has triggered Fed to stay put for now.

"The Fed has repeatedly raised concerns in the past few weeks with respect to the risk of Brexit," said Baliga.

"More than a dismal US jobs data released recently, the EU referendum which occurs a week after the Fed meet is potentially the main factor behind a much toned down expectation of a Fed rate hike in the June policy," the expert added.

On 23 June, the British people will decide to 'leave' or 'remain' in the European Union. This referendum on whether Britain should exit the EU or not has been dubbed as Brexit.