There is a sense that major markets could be at near to medium term inflection point. Today’s meeting of the Federal Open Market Committee (FOMC) is expected to deliver a third consecutive rate cut. Since the Fed cut rates for the first time back in July, traders have pondered over whether these were just mid-cycle adjustment “insurance” cuts, or part of some greater easing cycle. How Fed chair Powell delivers the message today could be crucial for the medium term dollar outlook. Since the trade dispute started looking more positive, the dollar has been hit across majors, with improved risk appetite being dollar negative. Whilst the path towards an amicable resolution in the trade dispute is not assured, the Fed may still remain cautious. Yesterday’s third consecutive month of Consumer Confidence decline will be a worry for the Fed after a recent decline in retail sales. Major markets are at key near to medium term inflection points too. EUR/USD has drifted into $1.1060/$1.1100 support, whilst the dollar is also flirting at the key 109.00 resistance against the yen. Add in gold a shade above $1480 again and we could see some key outlook changing moves for the dollar should the Fed deliver a more upbeat message with its cut today. Are these just retracements in what looked to be a more dollar negative outlook, or is the dollar about to get a new lease of life? It is over to Jerome Powell.
Wall Street was cautious into the close last night with the S&P 500 ending the session a shade lower (-0.1%) at 3037. US futures are similarly cautious again today (-0.1%) all of which has added up to a slip away on Asian markets with the Nikkei (-0.6%) and Shanghai Composite (-0.5%). European markets are also following suit in early moves, with FTSE futures -0.1% and DAX futures -0.2%. In forex, USD is slipping back this morning in front of the Fed and continuing a theme of yesterday’s session. Broadly though, major forex is on hold ahead of the Fed. In commodities there is a similar feel of consolidation with gold +$1 and silver a shade positive. The oil is has been pressure in the past couple of sessions and is again a touch weaker today.
It is a huge data of data and announcements during the US session, but there will be an eye out for German inflation too with the implications it could have for the Eurozone. German HICP is at 1300GMT and is expected to slip to +0.8% (from +0.9% in September). On to US data, the ADP Employment change at 1215GMT is expected to drop further to 120,000 (from 135,000 in September) and this is an early outrider for the payrolls report on Friday. US Q3 growth is then the focus, with Advance GDP at 1230BST which is expected to show a decline to +1.6% (down from the +2.0% Final Q2 GDP). The Bank of Canada monetary policy is at 1400BST which is expected to see no change to the +1.75% rate again. EIA Crude Oil Inventories are at 1430GMT which are expected to show a very slight build of +0.7m barrels (after last week’s surprise drawdown of -1.7m). However, the main event of the day is undoubtedly the FOMC monetary policy decision at 1800GMT. The Fed is expected to cut the Fed Funds range for a third consecutive meeting by -25 basis points to +1.50%/+1.75% (from +1.75%/+2.00% in September). T