Global Markets:

  • Asian stock markets: Nikkei and Hang Seng both up 1.50 %, Shanghai Composite gained 1.40 %, ASX lost 0.20 %
  • Commodities: Gold at $1229.50 (unch), Silver at $17.21 (-0.10 %), Crude Oil at $81.58 (+0.20 %)
  • Rates: US 10 year yield at 2.289, UK 10 year yield at 2.235, German 10 year yield at 0.879

News & Data:

  • Japan Industrial Production 2.7 %, Expected: 2.2 %, Previous: -1.9 %
  • New Zealand ANZ Business Confidence 26.5, Previous: 13.4
  • China Westpac-MNI Consumer Sentiment 110.9, Previous: 113.2

Markets Overview:

It was a very quiet Asian session in FX, with most major pairs consolidating within tight ranges ahead of the FOMC tonight. EUR/USD traded 1.2730-40, GBP/USD 1.6125-45 and even the USD/JPY was stuck in a 15 pips range, trading 107.05-20. AUD/USD was finally able to break out of it’s 2-week consolidation and reached a high of 0.8881 after weak US econ data. A more dovish FOMC could lead to a break above 0.89 and eventually a test of 0.90. USD/CAD fell beneath the 1.1185 support level yesterday, clearing a fair amount of stops down to 1.1170. Short-term techs are looking bearish and suggest another test of 1.1070 soon.

Today’s main event will be the FOMC announcement. The market is expecting a reduction in asset purchases from $15 billion to zero, ending the QE experiment. Further, most see the Fed maintaining the “considerable time” reference in their statement. What are the dovish risks? Anything less than a $15 billion taper would be viewed as dovish and lead to USD weakness. While keeping “considerable time” in the statement wouldn’t surprise anyone, there is a chance that the FOMC will add new commentary regarding the increased market volatility recently and the economic weakness abroad. What are the hawkish risks? The first one is that the Fed removes the “considerable time” language, but that seems rather unlikely. The second one is a stronger emphasis on data-dependent guidance. Meanwhile, a $15 billion taper is already priced in and wouldn’t move the markets much.

Upcoming Events:

  • 09:00 GMT – Norway Unemployment Rate (3.4 %)
  • 09:30 GMT – UK BoE Consumer Credit (0.80bln)
  • 09:30 GMT – UK M4 Money Supply (0.5 %)
  • 12:30 GMT – Canadian RMPI (-1.0 % MoM)
  • 18:00 GMT – FOMC Statement
  • 20:00 GMT – RBNZ Interest Rate Decision (3.50 %)
  • 20:00 GMT – RBNZ Statement
  • 20:15 GMT – Bank of Canada Governor Poloz speaks