Intraday Market Thoughts

Fed Waits, BOE Next

by Adam Button
Nov 1, 2017 22:30

The Fed touted better growth but the FOMC statement reiterated concerns about low inflation. The New Zealand dollar was the top performer after solid jobs figures, while the Swiss franc lagged. Australian trade balance is due next followed the BoE decision on Thursday. 2 GBP and 1 FTSE trades are in progress.

Click To Enlarge
Fed Waits, BOE Next - Gbpusd 10 2 Spread Nov 1 2017 (Chart 1)

The Fed decision was a bit of a dud in terms of market moves. The initial reaction was to sell the US dollar as the Fed indicated inflation has declined this year but it quickly rebounded on an upgrade in the growth assessment to 'solid' from 'moderate'.

USD traders now shift to Thursday's tax plan. A Congresswoman said the details will be released at 9 am ET (1300 GMT). The drawback to much details is disappointment. Political spin is sure to come from deficit hawks. The grandstanding will be intense and that might prompt a move to safe havens.

The other US news to come on Thursday will be the Fed chair decision. However, a late-breaking report says Powell has been told the job is his. That decision was mostly priced in and the attention will now turn to his comments during confirmation and signals on future hikes.

Before that, data on Australian trade balance is due at 0030 GMT. The consensus is for a surplus of A$1.2B and any miss could send another jolt through AUD trading.

The bigger market mover will be the Bank of England decision. The market is pricing in a 90% chance of a hike so the bigger driver will be signals about what's next. The BoE Minutes will show the extent of unanimity, the BoE inflation report should enlighten on inflation and growth revisions and forecats, while Carney's testimony never disappoints.

Plenty of market watchers are talking about a one-and done but the market is pricing in a 37% chance of a second hike in February. That's a low bar. Carney could sound his usual neutral stance, but if he's constructive about growth then it would leave the door open for that second hike.

Act Exp Prev GMT
FOMC's Dudley Speaks
Nov 02 16:20
Trade Balance
1.42B 0.99B Nov 02 0:30

Latest IMTs