The USD is slightly higher going into the Fed announcement with cautious tones across forex, bond and equity markets as investors wait for the FOMC announcement today. AUDUSD and NZDUSD are relative outliers in showing respective declines of 0.2% and 0.3% at the London interbank open. USDJPY has maintained a narrow range in the lower 108.00s and EURUSD around the 1.1065-70 mark, capped at 1.1075 and consolidating after rebounding yesterday from Monday’s bout of dollar-driven losses. The Dollar itself had attracted a safe haven bid in early-week trading as markets reacted to news of the drone attack that took out about half of Saudi oil production and distribution facilities, though this petered out as oil prices staged about a 50% retracement of the surge seen on Monday (which was the biggest one-day rally in over a decade ), catalyzed by a report that suggested that production could be restored much faster than initially feared. Another factor that saw the Dollar bid weaken was the Fed’s $75 bln injection into the financial system. Markets are now looking to the Fed’s policy announcement today, where expectations are for a 25 bp cut and communication that pegs the move more as a mid-cycle adjustment and less as a second cut in a protracted easing cycle. The BoE and SNB are due to make policy decisions tomorrow. The BoE is likely to be a non-event, with no-change widely anticipated. The SNB is also expected to maintain unchanged policy.
On the Brexit front, the UK Supreme Court is hearing the government’s appeal on the ruling from Scotland’s highest court that the government’s suspending of parliament was illegal. A decision is expected tomorrow or Friday. Most likely, although not a certainty, it will agree with the recent court rulings seen in England and Northern Ireland, that the matter was “non-justiciable” — being political rather than a legal matter. If the appeal is successful, it is still not clear if the UK Parliament will be recalled or if the government will prorogue proceedings for a second time.
Click here to access the Economic Calendar
Head Market Analyst
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.