October 21, 2019

Investors still nervous before Fed outcome

LQDFX Forex news Blog Investors still nervous before Fed outcome

Investors focus on the outcome of a Federal Reserve meeting where officials are widely expected to cut interest rates.

Economists and analysts widely expect for cues on the U.S. central bank’s stance on monetary easing. Fed is to cut its benchmark rate for a second time this year to counter risks posed by the U.S.-China trade war.

While a 25-basis point rate cut is seen as near-certain, investors look to the statement and economic projections from Fed policymakers, given signs of deep disagreements among them. Investors will look for answers on how much more help the economy will need considering that unemployment is low, and growth remains steady.

The ongoing U.S.-China trade war has raised policymakers’ concerns about slowing factory output. But resilient domestic consumption has given hawks some reasons to worry about cutting rates too hastily. Possibly further complicating their discussions, short-term U.S. interest rates shot up this week.

The Federal Reserve will conclude its latest policy meeting on Wednesday buffeted by conflicting economic data. Steady pressure from the White House for steep interest rate cuts and confrontation as well with an unexpected jump in overnight borrowing costs that may require action on its own weigh.

After the Fed releases its policy decision, attention will turn to the Bank of Japan’s meeting ending on Thursday to see if it follows its global peers by easing policy. Deepening negative rates will be an option if the BOJ eases. However, the central bank may accompany that with measures to mitigate the pain on financial institutions.

The BoE is expected to keep interest rates at 0.75% on Thursday when it meets. Policymakers have said rates could rise or fall in the event of a no-deal Brexit.

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Forex – Investors still nervous before Fed outcome

A retreat in global oil prices also restored some calm to markets. Markets await BoJ meeting on Thursday.

The dollar index against a basket of other currencies rose to 98.28. The dollar has been driven more by trade tensions between Washington and Beijing this year than by U.S. monetary policy.

The dollar held near a seven-week high against the Japanese yen, edging up 0.1% to 108.23 yen.

The euro was steady at $1.10640, more than last week’s 1% above the $1.0927, the lowest in more than two years.

Sterling fell 0.3% to $1.2457 from trading around $1.2480 before the inflation data was released. That followed a rally to a six-week high on Tuesday of $1.2528 on the back of optimism that Prime Minister Boris Johnson was trying to secure a Brexit deal with the European Union before the Oct. 31 deadline. Against the euro sterling was unchanged at 88.585 pence.

Oil prices steadied on Wednesday as Middle East events kept investors nervous. Caution ahead of an expected U.S. interest rate cut kept wider financial markets in tight ranges. Brent crude futures dipped 0.26% to $64.38 a barrel, having conceded about 65% of their gains made after the weekend attack. WTI crude lost 0.5% to $59.06 per barrel, paring back around half of its gains after Saturday’s attack on Saudi Arabia’s oil facilities.

Gold prices were flat ahead of Fed outcome. Spot gold was barely changed at $1,502.62 per ounce as of 0529 GMT. U.S. gold futures were 0.2% lower at $1,510.40 per ounce. Silver eased 0.4% to $17.94 an ounce

PLEASE NOTE The information above is not investment advice.

Sources: Reuters, Investing, CNN money

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