Decision time for the Fed

Thursday, September 17, 2015

It is decision time for the US Federal Reserve.

19:00 BST: FOMC rate decision, statement and projections.

19:30 BST: Fed’s Chair Yellen’s press conference.

It seems that global markets are going into today’s FOMC’s meeting with a “dovish” mentality. We may be surprised with an interest rate hike despite the recent tepid US economic data. The USD index has been under some pressure ahead of the announcement, retreating towards 95.0 against a basket of currencies in early trade.

FOMC Rates since 2000

FDTR Index (Federal Funds Target 2015-09-17 09-13-00 

Asian equity markets were mixed overnight. The Hang Seng index gave back yesterday’s gains and slid lower by 0.40% towards 21,880, while the Shanghai Composite index extended declines and retreated by 2% towards 3,080.

However, the Nikkei index continued its strong upside momentum and rallied by 1.4%, adding over 260 points towards 18,500. Japan’s exports increased by 3.1% y/y in August, missing expectations of a 4.3% rise, while imports declined by 3.1% versus estimates of a 2.5% drop. In the meantime, Standard & Poor’s downgraded Japan’s sovereign rating from AA- to A+, although the outlook was revised to stable.

A strong 8.3-magnitude earthquake hit Chile’s northern region on Wednesday evening, prompting Chilean authorities to ask residents to evacuate low-lying coastal areas in case of tsunami. Antofagasta and Codelco suspended operations at two major copper mines in Chile, the world’s top producer of the metal, threatening over 600K tones of annual capacity. Anglo American and BHP Billiton reported that their mines were unaffected. LME Copper surged to 2-month high in early Asian trading as concerns about copper supply disruptions offset the recent Chinese slowdown. Copper continues its upside momentum after hovering around $5,400 in early trade.

Investors remain highly uncertain ahead of the FOMC decision and there is increasing volatility and nervous trading conditions. European equity markets consolidate within the recent range in early trade, struggling for direction. The DAX, CAC, IBEX and London equity benchmark indices remain broadly flat, while the euro climbed higher above 1.13 against the USD.

Market participants will be keeping an eye on the release of the US housing starts and building permits for August as well as weekly jobless claims. The release of the Eurozone’s construction output and UK retail sales will draw investors’ attention.

USD remains under pressure ahead of FOMC announcement

DXY Curncy (DOLLAR INDEX SPOT)   2015-09-17 09-10-37 

Events for today:

0930

UK

Aug

Retail Sales

1000

EZ

Jul

Construction Output

1330

US

Aug

Housing Starts

1330

US

w/e

Jobless Claims

1500

US

Sep

Philadelphia Fed Business Outlook

1530

US

w/e

EIA Nat Gas

1900

US

Sep

FOMC Rate Decision

 

All times UK Local Time

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