Markets hold steady awaiting FOMC rate decision

A rate announcement from the Federal Open Market Committee is in focus, on an otherwise quiet day for data.

Previous Day's Market Highlights

Sterling strengthened due to both a struggling USD as well as growing expectations of a Brexit deal being reached. Sterling strengthened around .7% against the dollar (ending the session at a 2 day high) and .5% against the euro, with the latter not being helped by comments from the ECB chief economist Peter Praet which played down Draghi’s hawkish overnight comments on inflation.
 
In addition, the Japanese Yen was marginally weaker after an increase in US bond yields and the risk off sentiment in the market dissipating. US 10 year yields hit 3.1%, just below the yearly intraday peak of 3.12%.
 
The only economic data of note was the release of US consumer confidence data, printing an above forecast 138.4 compared to market expectations of 132.2. The dollar however was unmoved by this data with market participants overlooking the data and focusing on the wider picture with focus shifting towards this evening’s FOMC meeting. Speeches from the BOJ’s Kuroda and the BOE’s Vlieghe did little to move their respective currencies with neither offering any new comments.
 
Finally, the Argentinian Peso fell once again after the head of the country’s central bank resigned just 3 months into the job. The Peso initially fell over 4% against the dollar however recovered some ground later in the trading day. Focus is likely to turn to fears of possible contagion from the Argentinian crisis into the wider emerging markets bloc.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1198 1.1302 1.0996 2.71%
GBP/USD 1.3175 1.3298 1.2785 3.86%
EUR/USD 1.1766 1.1815 1.1526 2.45%
GBP/AUD 1.8141 1.8401 1.7508 4.85%
GBP/NZD 1.9771 2.0031 1.9150 4.40%
GBP/CAD 1.7068 1.7190 1.6596 3.46%

Today's Market Highlights

Despite a quiet day for data today, there are two meetings of major central banks which will impact the market.
 
Firstly, it is widely expected, and 100% priced into the market that the FOMC will announce a 25bps hike to their main federal funds rate, bringing the range to 2%-2.25% for the first time in a decade. The main impact on the dollar will come from the tone of the statement accompanying the decision combined with the dot plot showing FOMC members’ forecasts for interest rates over the coming years.
 
With the market currently unsure of the pace at which monetary policy will be tightened in 2019, hawkish changes to the economic projections will likely see further dollar rally as well as the return of turbulence in emerging markets.
 
Later in the day, the Reserve Bank of New Zealand will also announce its latest policy decision. It is expected to keep interest rates on hold at 1.75%, with a less than 5% chance of a rate change being priced in by the OIS market and no move being priced in the next 6 months. Therefore, the main impact on the kiwi dollar will be through any commentary on the exchange rate by the central bank or rhetoric around the low inflation rate.

Today's Economic Calendar

Time Currency Release Consensus Previous
3:30pm USD Crude Oil Inventories -0.7M -2.1M
7:00pm USD FOMC Rate Decision 2% - 2.25% 1.75% - 2%
7:00pm USD FOMC Economic Projections
7:00pm USD FOMC Statement
7:30pm USD FOMC Press Conference
10:00pm NZD RBNZ Official Cash Rate 1.75% 1.75%
11:00pm NZD RBNZ Press Conference

Caxton