The U.S. Dollar is trading in familiar ranges ahead of the much-anticipated FOMC decision announcement at 2PM later today.
Overview
As far as risk markets are concerned, the press conference will be key in assessing just how determined Fed officials will be next year in leaving things be after rounds and rounds of increasing interest rates with the goal of combatting inflation. Now that data points to an expanding economy troubled less by the record pace of price growth post-pandemic, markets are wondering if the economy will sustain momentum or if recessionary pressures will develop as a result of long periods of higher borrowing costs.Earlier, we received further evidence of the disinflation going on in the supply-side with Producer Price Index figures from November coming in flat as expected following a contraction in October. When Fed chair Powell addresses the media later, he is going to be questioned about their wait-and-see approach, which he has defended considering that Fed communication of its expectations matched the desired outcome: prices have gone down while the economy was not put in any peril.We feel that officials will be split in mentioning the need to hike once or twice more to achieve the target of 2.0% annual inflation, which could keep the Buck afloat as it signals less dovishness than equities and other traders are looking to hear.
What to Watch Today…
- FOMC Meeting Today 2 PM
- ECB & BOE announcements Thursday AM
- Monex USA Online is always open.
EUR ⇑
The Euro has not been a big mover, but that is likely to change after 2 pm today and into our evening as the next trading session is packed with other central bank announcements. The European Central Bank is set to meet while ECB President Christine Lagarde holds a press conference. Her tone will be closely monitored as economic headwinds test the ECB’s determination from early this year to maintain a tightening mandate after years of accommodative measures.
The financial environment may need it after data revealed Industrial Production in October fell more than expected at (-0.7%) vs. (-0.3%) However, some confidence surveys suggest that the Eurozone will experience a revival in 2024, which bodes well for the shared currency, which has improved since the start of November.
GBP ⇓
The Pound fell slightly after this morning, showing that economic troubles are brewing and could continue to get worse. Gross Domestic Product in October fell (-0.3%) when just (-0.1%) was estimated. Additionally, the last 3-months have averaged 0.0% improvement after economists believed the economy could stay in the positive.
Industrial Production and Manufacturing also disappointed with contractionary readings. We will see how Bank of England dynamics change, if at all after BOE Governor Andrew Bailey post-meeting. Cuts to interest rates are predicted to come by the end of Q2 next year. We will see if those chances increase considering the situation.
