Markets more Edgy

2 November, 2016

On face value, the market is seeing this evening’s Fed decision as a non-event, the chance of an interest move being less than 20%. For next month, it’s nearer to 70%. The interesting thing is how the voting pattern will change. The September meeting saw three members dissent in favour of higher rates. Will they pull their vote for higher rates on the basis of the impending election? Some may take that as a sign of a politicised Fed; others may take it as a sign that the Fed is aware of the potential economic impact of the outcome of the US election. But within this, the accompanying statement will be scrutinised for signs of a strengthening of the resolve to raise rates in the following month. Naturally dollar volatility risks are greater around the time of the announcement at 18:00 GMT.

Talking of the US election – it’s difficult to pull away from the subject – the narrowing of the polls has seen Trump marginally ahead in the latest Washington Post-ABC News tracking poll. The US election is not a national poll though, so things will be complicated on the night. Nevertheless, these latest developments has seen expected volatility rise in both equities and FX. The dollar has weakened vs. the single currency and the yen, whilst gold has pushed ahead. So after the slumber that was setting in during most of October, the election is having an increasing impact on markets, something which is likely to remain in place between now and next Tuesday. There is little to distract on the data calendar between now and the Fed, but markets will be increasingly sensitive to US election developments through the day.


Source link  
Peaked trade optimism?

Throughout the past week, the US dollar has received support after strengthening expectations that the Fed will take an extended break after three consecutive rate cuts...

Russel 2000 doesn't support S&P500 optimism

S&P500 closed Monday at historical highs, adding 0.55% on the day close. Both expected new Fed interest rates cut and possible...

Oil drops on weak corporate data out of China

Oil prices fell on Monday after strong gains last week, as data released in China reinforced signs that its economy is slowing, though progress...


Market Sentiment Hinging On Progress In Brexit

The British parliament will vote on the Brexit agreement today at 18:00 GMT. In theory, this should be a simple vote, with a definite...

Market shows demand for yielding assets

The market shows demand for yielding assets, which in turn supports demand for the stocks and currencies of emerging markets. The main...

Yuan and Dollar as a weapon in trade wars

The US Nonfarm Payrolls on Friday could even be called boring: the report showed the preservation of a completely healthy labour market...


Disappointment with Fed and tariffs

Trump announced 10% tariffs on Chinese goods worth $300 billion since September 1, thus ending the US-China trade truce after disappointingly...

Fed pushes down stocks

Markets have started the week under pressure. Expectations that the Federal Reserve will cut interest rates by 50 points in July collapsed...

Gold updates new 6-years highs

Gold benefits from a combination of two factors: lower interest rates in debt markets and continuing hopes that the global economy...

  


Share it on:   or