Markets Take a Breath Ahead of the FOMC Rate Decision this Evening

The global markets are holding steady as traders position for the FOMC today and the ECB tomorrow.
Ed Anderson
Asian Markets

In an interview with FOX News, US President Trump suggested that there will be additional tariffs imposed on China on Friday focussed on Chinese agricultural products. Chinese stock markets are down as a result but most other markets are steady today ahead of the FOMC Rate Decision to be announced later. During the same interview, the President said that “War Games” would be suspended whilst negotiations are ongoing with North Korea in a show of good faith. He also made the comment that the Iran deal was worse than NAFTA, highlighting the dire situation for the trade agreement in North America. USDCAD is higher trading above 1.30000 at 1.30200.

Data published on Tuesday once again confirmed a positive sentiment in the U.S. whilst Europe continues to slow down. In Britain, average hourly the earnings growth rate fell to 2.8% 3m/y from 2.9% from a month earlier. This is worse than expected and confirms the trend for further decreased this year. Unemployment’s claims data indicated a pleasant surprise but the markets are now paying much more attention to inflation rates. The data caused another round of GBP weakening.

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The business sentiments index data from Germany and the ZEW data for the eurozone were also noticeably lower than expected. The index for the eurozone fell sharply from 2.4 to -12.6. This is a very abrupt transition from optimism to pessimism. In this case analysts, on average, expected to see a number close to zero. Recent developments around foreign trade, the Iran Nuclear Deal and the political situation in Italy have noticeably eroded sentiment. Meanwhile, inflation growth and the slowdown of the European economy has resulted in pressure on the assessment of current conditions.

However, data from the States was above expectations with annual total CPI accelerating to 2.8%. This is the highest rate in more than 6 years and is another signal in favor of the Fed’s decisive steps to curb inflation. The increase was likely caused by an increase in gasoline prices, the weakening of the dollar over the past year and strong labor market conditions.

The publication of such strong statistics allowed the dollar to turn to growth in the afternoon in anticipation of tomorrow’s meeting of the FOMC.

  • EURUSD is up 0.04% overnight, trading around 1.17498.
  • USDJPY is up 0.18% in the early session, trading at around 110.563
  • GBPUSD is down -0.04% this morning trading around 1.33668
  • Gold is flat in early morning trading at around $1,295.70
  • WTI is down -0.11% this morning, trading around $65.9

This article was written by FxPro

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