The U.S. Dollar is trading in weaker ranges to start of a week marked by its importance in monetary policy as the Fed meets and makes its announcement on Wednesday.
Overview
By now, there has been plenty of speculation and analysis about the state of the economy and what the Fed could do to stimulate growth. Prices remain on an increasing pace for many items and large orders, but the focus is now on the lack of momentum in labor and surveys that show companies are hesitating in committing to future purchases. Meanwhile, even big technology firms are running into trouble after chipmaker Nvidia was accused by Chinese regulators of violating anti-monopoly laws.
As we move through the week, there will be plenty of concern about how the Fed presents their decision and if they suggest interest rates will be slashed next year. In the next few days, other regions will see central bank gatherings such as Bank of Canada on Wednesday as well, followed by the Bank of England on Thursday, and Bank of Japan on Friday. There will be some employment gauges to see if they affect how the Fed feels about telegraphing cuts for what is left of the year. We think that there is chance for a “Hawkish cut,” meaning they cut by 25 basis points but officials exert confidence that the economy may not need consecutive cycles and be very data-dependent prior to acting loosely again.
What to Watch This Week…
- FOMC Meeting on Wednesday 2PM
- Monex USA Online is always open
The complete Economic Calendar can be found here.
GBP ⇑
The Pound is currently trading at its highest point over the Buck since the first week of July, improving ahead of a busy week featuring the BOE meeting after the Fed. Currently, the expectation is of no cuts from officials after having reduced their benchmark rate to 4.0%. Recent months have seen the government face challenges implementing their budget and spending plans while rounds of protests have spurred as the population faces economic sluggishness mixed with dissatisfaction over current immigration policy. While it may not sound ideal, the economy has surprised in how it held up this year and avoided recessionary pressures.
CAD ⇑
The Canadian Dollar is mostly flat ahead of a key decision by the Bank of Canada, which is expected to be “dovish.” The current rate stands at 2.75% but is slated to be cut to 2.5% with odds of it happening at 93.0%. Unlike the U.K., our northern neighbor’s economy has been struggling, and July is said to have experienced contraction. The tone in all press conferences will be the most important thing to watch out for while volatility may not necessarily jump as markets come to embrace what may be ahead for Q4 with a little monetary boost for markets.
