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The Federal Reserve (Fed) minutes from the September 20th/21st meeting suggested that a September interest rate hike was a closer-than-expected call. The FOMC’s voting members agreed that the macroeconomic fundamentals became favourable for an interest rate hike in the US, while several believed that a rate hike was ‘needed relatively soon’.
Following the Fed’s September meeting minutes, the market assesses a 68% chance for a December rate hike, provided that the macroeconomic data and the political situation in the US are supportive of an orthodox move.
The FOMC is expected to remain on hold at its next monetary policy meeting, due on November 1st-2nd, a week before the November 8th presidential election. Heading into the US election, we could see a certain lack of appetite due to pre-election political risks and expect an increase in the US dollar volatility, which would include potentially sharp positive and negative moves, and compromise the Fed related strength both in the US dollar and the US sovereign market. Downside corrections could offer interesting buy-the-dip opportunities for building on mid/long-term USD-long positions.
The US 10-year yields topped at 1.80% yesterday, before easing to 1.73% in Asian trading session.
EURUSD slips below 1.10
The euro slipped below the 1.10 level against the US dollar for the first time since July. Talks that the European Central Bank (ECB) could review its Quantitative Easing programme bolstered euro outflows towards the US dollar. The ECB is looking for alternatives to be able to expand its asset purchases programme beyond March 2017, and this would require changing the capital ratio, buying bonds yielding below the deposit rate, and/or buying front-end bonds.
The divergence between the Fed and the European Central Bank (ECB) policy outlook is clearly weighing on the pair, as the US-EU rate differential reached a new low. The key short-term supports are eyed at 1.0951 (Jul 24th low) and 1.0910 (Jun 23rd low).
European markets look set to turn lower at the start of trading on Monday. The new US and Chinese tariffs take effect today so traders in Asia and Europe look cautious. Both continents are more exposed to global trade than the US. For markets, the new tariffs …Read more
Whilst risk sentiment has been healthy across the week, this swelling optimism boosted US stock markets to an all-time high overnight. A rally in tech stocks, which have done a lot of lifting for the indices over the year, in addition to fading concerns over U…Read more
Despite a shaky end to trading on Wall Street overnight, which saw the Dow gain 0.6%, the S&P just 0.1% and the Nasdaq slip by the same, Asian markets moved broadly higher on improved sentiment. European bourses are taking the lead from the US over Asia, w…Read more
Asian markets took the lead from Wall Street overnight, rallying as the latest tit for tat measures in the escalating trade spat have not been quite as severe as the markets had been expecting. Tech stocks were also heavily in demand, bouncing back after steep…Read more
Traders are faced with a sea of red in risk-off trading as markets are set to open on Tuesday. Despite the fact the market has been expecting an escalation in trade tensions between the world’s two largest economies with further tariffs from Trump; the reality…Read more
Escalating trade tensions will once again be a central theme to driving sentiment and trading this week, with President Trump widely expected to levy tariffs on a further $200 billion worth of Chinese imports, potentially as soon as today. The elevated trade c…Read more
European bourses are set to take the lead from a positive session on Wall Street and Asia overnight. A drive higher from tech stocks on Wall Street helped lift Asian equities after their recent battering, pulling them off 2-year lows.
Asian markets were endin…Read more
Today will be a busy day for traders with 2 central bank rate decisions and US inflation data all due for release within a few hours of each other. The BoE monetary policy announcement will kick things off, followed shortly after by the ECB rate announcement a…Read more