Traders Tetchy Ahead Of Fed Meeting

Europe

European equity markets are in the red as we approach the end of the trading session. Dealers continue to be on edge as the talk of a trade war adds to the negative sentiment. The EU are talking about levying a tax on digital revenue as a way of clamping down on tech giants paying a relatively small amount of tax in Europe. This has added to the jitters surrounding the possibility of a trade war.

The French division at Kingfisher (LON:KGF) continues to be one of the worst performers at the group, and a stock availability issue weighed on the firm’s figures. The Screwfix business in the UK and the Polish division are in rude health. Revenue rose by 3.8%, but profit slipped by 10%, and the company stated that the business climate was mixed. The less-than-optimistic forecast, combined with continuing French issues, dented investor sentiment. If the stock remains below the 200-day moving average at 319p, it could target 298p.

Softcat (LON:SCTS) shares have been hit by a bout of profit-taking. The company revealed respectable figures, but investors decided to take some cash off the table. Revenue for the first-half increased by 24.8% and gross profit rose by 22%, while the interim dividend was boosted by 3.3%. In January and February a number of investment banks upped their ratings for Softcat, so it would seem that brokers had high hopes for the stock. The share price has been in an upward trend since late 2016, and today’s move lower may entice new buyers.

US

Indices are mixed today as investors remain cautious over the possibility of a trade war. The EU are contemplating imposing a 3% tax on various online services, and this has added weight to the argument we are heading for a trade war. It is possible we could see pressure put on tech giants such as Alphabet (NASDAQ:GOOGL), Google’s owner.

Facebook (NASDAQ:FB) is still in the news for all the wrong reasons, as the scandal in relation to Cambridge Analytica has tainted the company’s image. The stock lost ground in early trading, but has now turned positive.

At 6pm (UK time) the Federal Reserve is widely tipped to raise interest rates to 1.75% from 1.5%. A growing number of traders are now talking about the possibility of four rate hikes this year. Jerome Powell took over the Fed chair in February, and he is likely to pick up where Janet Yellen left off in terms of language and tone.

US total homes sales in February jumped to 5.54 million, up from 5.38 million, with economists expecting a reading of 5.4 million.

FX

GBP/USD has pushed higher on the back of solid unemployment and wages data from the UK. The jobless rate in the UK fell to 4.3% - its joint-lowest since records began, and monthly earnings ticked up by 2.6%. With British inflation sliding and earnings rising, things are looking up for consumers in the UK. Sterling has been climbing versus the US dollar since the start of the month, and if 1.4088 is cleared it could target 1.4150.

EUR/USD is gaining ground on the back of the weaker greenback. There were no major economic updates from the eurozone today, but traders will be keeping an eye on this evening’s Fed meeting. Dealers are treating an interest-rate hike of 0.25% as a done deal, but the press conference that follows might give us an idea what the US central bank will do throughout the year.

Commodities

Gold has been lifted by the softer US dollar, but traders may not be overly long going into the Fed meeting this evening. The press conference could lay the foundations for four rate hikes this year. Lately the inverse relationship between the US dollar and gold has been strong, and given we have an update from the Fed in a few hours, it is likely to remain strong.

WTI and Brent Crude were jolted higher on the back of the energy information agency inventory data. The report showed that US oil inventories fell by 2.62 million barrels, while traders were expecting a build of 3.05 million barrels. Gasoline inventories fell by 1.69 million barrels, and dealers were expecting a drop of 2.4 million barrels.

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