US Stocks Pull Back Ahead of Fed – Dow down 0.45%
The three major US indices pulled back in trading yesterday as investors assessed trade deal updates, some disappointing earnings reports, and the pending Fed interest rate decision. The Dow fell 0.46% to 44,632, the S&P 0.30% to 6,370, and the Nasdaq dropped 0.38% to 21,098. Treasury yields took a hit after recent gains ahead of the Fed, the 2-year down 4.7 basis points to 3.869%, and the 10-year down 8.9 basis points to 4.320%. The dollar, however, pushed higher again, the DXY up 0.29% to 98.92. Oil prices surged again as the US continued to pressure Russia towards a ceasefire in Ukraine, Brent up 3.76% to $72.67, and WTI up 3.84% to $69.34 a barrel. Gold prices pushed higher after recent losses as concerns on a delayed China-US trade deal led to some haven flows, up 0.36% on the day to $3,326.09 an ounce.
Central Banks to Hit the Markets in the Next Couple of Days
FX traders, in particular, are preparing for some potential trend-changing updates from major central banks in the next few days. The Bank of Canada and the Federal Reserve Bank are due to release interest rate updates within hours of each other later today, and they are followed by the Bank of Japan midway through the Asian session tomorrow. All three are expected to keep rates on hold on this occasion, but the messages from them in their statements and following press conferences could provide some longer-term trade opportunities. All major central banks have been referring to the potential impact of US tariffs on their respective economies, and with some clarity coming over recent weeks, traders will be looking for some stronger indications from the banks on their next interest rate moves, and this could lead to longer-term trends in their currencies. Traders will be watching the two North American banks for an indication of when we see any further cuts and how many, while in Japan the next move is likely to be another hike, and this could present some good interest rate differential trading opportunities in the coming days and weeks.
Macroeconomic Calendar Heats Up from Today
The macroeconomic calendar starts to heat up from today all the way through to the last session of the week, and traders are expecting to see plenty of volatility in the coming days, especially around US data. The initial focus in Asian markets will be on Australian markets with the key quarterly CPI data due out. Expectations are for the headline number to show a 0.8% q/q increase, with the trimmed data a 0.7% q/q increase, while the year-on-year data holds steady at 2.1%. The European session also has inflation data due out, with the Spanish Flash CPI expected to print at another 2.3% increase; the focus will then move north to Germany for the Prelim GDP data (exp -0.1%). However, the big moves are likely to come in the New York session again, with more US data due as well as rate updates from the Fed and the Bank of Canada. US ADP Non-Farms employment numbers (exp 77k) and Advance GDP data (exp 2.5% q/q) are first off the rank before focus moves north of the border for the Bank of Canada interest rate decision and press conference. US Pending Home Sales numbers and the weekly Crude Oil Inventory numbers are also due out before we have the crucial Federal Reserve Bank interest rate update, statement, and press conference towards the end of the session.
