Sagging Fed expectations

28 September, 2016

As discussed yesterday, markets will increasingly obsess about the US election over the coming few weeks, but beneath that the economy will determine if the Fed hikes interest rates before the year is out. After the last meeting, the chance of an increase in rates by year end was out over 60%, with that reading having now decreased to 50%. This shift in expectations has, in part, underpinned the weaker dollar seen over the past few sessions. For all the headlines about the election, the Fed is focuses on the economy and the messages on that have been mixed since the Fed meeting. It also has to be said that whilst the election result looks to be so close, the market will struggle to fully price in an US rate increase by year end. A Clinton victory could seal it, whilst the uncertainty caused by a Trump win could well reduce the chances of a December move. Like it or not, politics and economics are going to be ever more interlinked in this scenario. Leaving all that aside, the calendar for today is on the light side, with just US durable goods data at 12:30 GMT.

Note that we have some speakers in the form of ECB’s Draghi at 09:00 GMT, together with BoE’s Shafik just after 08:00 GMT. Oil prices are sagging below the USD 45pb level as expectations are downplayed by the Saudi’s ahead of the OPEC meeting in Algiers. There are signs of ground being gained in terms of accepting higher output elsewhere, which is why the oil price has sagged, but a significant push lower looks unlikely for now. Sterling continues to flirt with the 1.30 level on cable, whilst USDJPY is also having a torrid time with the 100 level.


Source link  
Risk Appetite Returns

North Korea official news agency reported on Monday that leader Kim Jong Un will watch the actions of the United States for a while longer before making a decision to fire missiles at Guam...

US-Korean Tensions Rattle Markets

Markets were cautious on Wednesday, as safe-haven assets pushed higher after tensions grew between the US and North Korea. Markets are concerned...

Global Manufacturing Grows

Recent data releases have shown that global manufacturing saw an increase in July, further confirming global economic momentum has carried into H2...


All Eyes on Central Banks

Markets were, for the most part, little changed on Wednesday as traders waited for today’s Bank of Japan and ECB rate decisions. Earlier today...

Dollar Bears

UK Consumer Price Index (CPI) data was released on Tuesday showing inflation easing for the first time in nearly 10 months, retreating from the near 4-year high touched in May...

More Record Highs for Equities?

Early indications from Asia this morning are pointing towards a strong day for global equities, continuing the momentum from last week...


US Data brings on USD bulls

U.S. job growth surged more than expected in June and employers increased hours for workers, with signs of a labor market strengthening that is likely...

Biggest Quarterly Drop in 7 Years

USD recovered marginally on Friday, but had its biggest quarterly decline against several currencies in nearly 7 years following hawkish signals...

Markets look to Central Bankers

Asian Equities traded higher on Tuesday approaching near two-year highs on Tuesday as USD strength helped exporters...

  


Share: