Market News Today – The FOMC and earnings remain the focal points. India continues to threaten, and there are some fears over developing inflationary pressures. No changes or surprises are expected from the Fed. Meanwhile, strong earnings have largely been priced in, so bulls are unwilling to chase stocks higher currently, especially with rates on the rise again. Wall Street was mixed but mostly higher, while the USA100 was modestly lower, though all are at or near all-time highs. Treasury yields advanced a further 2 bp to 1.64%. However, weaker than expected inflation data out of Australia helped to put a floor under local bonds and Australia’s 10-year rate dropped back -0.7 bp to 1.72%. Global Stock markets mostly managed to move higher. The JPN225 lifted 0.5%, and the ASX 0.4%, helped by expectations that the low inflation environment will keep the RBA sidelined for a long time to come.
In FX markets both EUR and GBP eased against a largely stronger Dollar, with EURUSD at 1.2074 and Cable at 1.3884. USDJPY lifted to 108.88, while the AUD was under pressure. USOIL meanwhile is trading at $63.18 per barrel. Gold prices fell to a 1-week low at $1,766, weighed down by firmer US Treasury yields with investors awaiting policy cues from the Federal Reserve’s statement, while Palladium retreats from the all-time high hit on Tuesday.
FOMC preview: This week’s FOMC is universally expected to maintain a steady policy stance. Policymakers will release their decision at 14:00 ET, and Chair Powell will follow up at 14:30 ET with his press conference. Remember too that this meeting does not include new economic projections. Officials have assured to a Spokesperson that the ZIRP posture will be maintained for “some time” into the future, and the dots suggest that this will be at least 2 years. The brightening economic outlook and the improvement in the job situation has not been enough to move the needle on policy, and Chair Powell has said there is a long way to go until the labor market returns to its pre-pandemic levels. The Fed should reiterate that the “path of the economy will depend significantly on the course of the virus, including progress on vaccinations.” It has also stressed it will maintain its accommodative stance until “substantial further progress” has been made on its dual goals, while emphasizing the stance is outcome based and that it will not act pre-emptively based on forecasts. The Fed won’t provide any clarity on what is “some time” or “substantial further progress.” There has been market speculation that the strength in the economy and the trillions of fiscal stimulus on board will see the Fed sound less hawkish, but that time is not now, especially with the surge in virus infections abroad. Officials will also be concerned over the negative effects of a taper tantrum.
Today – The FOMC kicks off its 2-day meeting today, while data releases in the US session include the US Advance Goods, the OPEC Meeting and Canadian Retail Sales. The heavy earnings slate will be the focus today, featuring Apple, Facebook, QUALCOMM, Shopify, Boeing, Sony etc.
Biggest (FX) Mover @ 07:30 GMT (+0.27%) – CADCHF turned above 20-DMA after more than 3 weeks at 0.7387. The overall outlook remains choppy. In the 1-hour chart, momentum is rising higher with fast MAs aligned higher, while RSI is at 63 with MACD extending northwards but keeps close to 0. ATR (H1) at 0.00062 & ATR (D) at 0.00540.
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Andria Pichidi
Market Analyst
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