EncoreFX’s daily market updates are written by our experienced and professional dealing team.
Markets Await Fed Decision
Published July 27, 2016
Overnight market action was dominated by news of a massive US$265B stimulus package from Japanese PM Shinzo Abe in the latest attempt to reflate the sputtering Japanese economy that has been mired in decades of low growth and disinflation
There are reports that the Japanese government is considering 50 year bonds to fund spending – bonds that could essentially be thought of as perpetual (i.e. never repaid)…
…The immediate impact on the Yen was a sharp 1.8% fall against the US dollar as traders pared back JPY long positions and got into higher paying equities which have risen across the board during the Asian and European sessions
The North American session brings the latest interest rate decision by the US Federal Reserve at 2pm ET
The Fed are widely expected to hold rates; however, the statement will be parsed for clues on whether they are starting to change their tune on the broader economic outlook
US labour markets and inflation metrics have been performing well – better than most other developed countries – and one could argue that the Fed should start to prepare the market for a September rate hike, currently not priced in
Uncertainties surrounding Brexit and aggregate demand in the global economy have been cited as the primary reasons for holding off; however, we suspect that we may see a less cautious statement from the Fed this afternoon
Payroll data has been excellent and there has been an uptick in production data as well; all told, the Fed may be less likely to sound negative on the US dollar and the economy
USDCAD is flat to yesterday's closing levels as it trades either side of the 1.3200 handle with risk skewed to the topside in the near and medium term
Oil continues to sputter but is holding just above yesterday's multi month lows with WTI trading at $42.75
Charts: USDCAD may test 200 DMA as WTI Oil breaks lower amid renewed short selling.