Bounce beginning to look stretched

AFTER the European Central Bank opened its monetary taps last Thursday followed by the delayed action rally on Friday, all eyes will be on the US Federal Reserve to see if it will tighten at this week's Federal Open Markets Committee (FOMC) meeting.

This meeting, which stretches over Tuesday and Wednesday, is one that ends with a press conference, so it won't be a case of just all eyes but also all ears as traders will absorb every word uttered by Fed chair Janet Yellen on the future of interest rates.

As at Friday, the federal funds futures market was pricing in only a 4 per cent chance of a rate hike this week, so if the Fed does tighten, it would come as a big shock. Or will it?