Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Europe Looks To Softer Start Ahead Of FOMC

Published 16/09/2020, 08:10
Updated 14/12/2017, 10:25

The lacklustre finish on Wall Street (expect tech) has followed through into Europe, which points to a softer start ahead of the Fed’s rate decision

Inflation beats GBP Holds Steady

After yesterday’s very mixed employment data, inflation figures were slightly brighter, although that wasn’t necessarily obvious looking at the Pound’s nonchalant reaction.

UK inflation surprised to the upside +0.2% YoY in August, better than the 0% forecast but still a sharp decline from last month’s 1% increase. Core inflation increased 0.9% YoY well down from last months +1.8% rise but still significantly better than the decade low 0.6% increase forecast.

GBPUSD has shrugged off the upbeat data and continues to trade under US$1.29

Fed in focus

The Federal Reserve are not expected to adjust monetary policy today. With no changes in monetary policy expected attention will be firmly on the updates staff economic projections (SEPs) and any further clarification on the shift in policy framework to Average Inflation Targeting. (AIT).

This is the first time that the Fed has convened since Jerome Powell announced that the Fed will allow inflation to run over the 2% target for extended periods of time to make up for long periods when inflation runs under the 2% target.

The dot plot

There is a good chance that the dot plot could be lowered to reflect that shift to AIT and the idea of lower rates for longer. This could drag on demand for the US Dollar, which has been under pressure this week heading towards the FOMC announcement.

The prospect of lower rates for longer is a winner for non-yielding gold. A lowering of the dot plot could see the precious metal build on its almost 1% gains so far this week. $2000 is back as a clear target, a level last seen a month ago.

US retail sales to remain strong?

Prior to the Fed, US retail sales will also be under the spotlight providing clues over the health of the consumer and their willingness to spend. Expectations are for US retail sales to increase +1.1% MoM in August, which would represent only a very slight slowdown from the +1.2% increase witnessed in July and would support the idea that the economic recovery in the US is continuing, albeit at a slightly slower rate.

Oil surges

Oil is pushing higher in early trade after the American Petroleum Institute (AP) recorded a significant draw in inventories, which combined with production disruptions in the Gulf of Mexico due to Hurricane Sally have seen WTI and Brent price jump over 3.5% across Tuesday and in early trade on Wednesday.

API reported a staggering 9.5-million-barrel draw for week ending September 11 vs a 2.04 million build expected. Despite the huge draw, expectations for future oil demand remain weak as economies struggle to bounce back from the covid crisis and as the health crisis rages on.

Oil chart Oil Chart

"Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient.

Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions."

Original Post

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.