We had a relatively subdued day across financial markets yesterday as we moved closer to today’s Federal Reserve Rate Announcement. Equities were largely mixed across the globe and the dollar remained in recent ranges against most of the majors despite the US treasuries remaining near their yearly highs. Oil also continued to trade to the topside with Brent sitting comfortably north of $81/b and WTI around $72/b as we start the Asian trading day . The main overnight news probably came from the UN where US President Trump aired his views on a variety of issues, nothing new really as far as the market was concerned, but he did earn a laugh after boasting of his and his administrations successes since coming into power.
The markets sit at very interesting levels, especially in the treasuries, as we move into this FOMC rate announcement, we’re fully expecting a 25bps hike today and the focus will be on the detail and message that the Fed communicates afterwards. Expectations are certainly on the more hawkish side of things and therefore the risk lays with a more dovish tone from the statement and from Jerome Powell in the press conference. The US domestic economy is trotting along nicely and data, despite a couple of recent misses, suggests that the Fed is on the correct path with their ‘gradual rate hike’ plan. However, the rest of the world is not in the same place and there’s no doubt that global investor caution is continuing to increase as the trade war between the US and China appears to be heating up. Analysts will be watching closely to see if the Fed acknowledges this and its potential impact on the US economy over the medium to long term, anything along those lines could see a correction in recent market moves.
Looking ahead to the rest of todays trading sessions and in terms of fundamental data releases it’s a light day, with just the ANZ Business Confidence numbers due out in NZ during the Asian session and the US Oil Inventory data to really interest traders before we get to the Fed. As usual investors will be wary of any fresh news on any of the main trade themes that continue to dominate market flows but in general today is all about the Fed.