An exciting day but first the activity overnight saw China leave its 5-year Loan Prime Rate at 3.95% and the 1-year rate at 3.45%, as expected. We have just seen UK CPI lower than expected at 3.4% yoy and GBP seems surprisingly supported on dips. Later today we have the eagerly awaited Fed Announcement, which is an hour ahead of the normal 7pm timeslot due to the clock changes and I hope doesn’t catch people out.
Now to the action, the Fed is widely expected to be unchanged but all eyes will be on the Dot Plot, at present we have 2 full 25bps cuts priced into the year end and slowly the market has become less dovish, why? Firstly the data -CPI; PPI; monthly payrolls; weekly initial jobless claims; house prices and energy trend would all suggest the Fed should not be cutting but then look at Retail Sales, weak industrial production and commercial real estate and they should. So this makes for a difficult Fed debate and forward-looking decision-making process is very tightly balanced and interesting. Secondly Politics, what if Joe Biden wins and keeps the fiscal taps open. What if Donald Trump wins re-election, and imposes tariffs? How does geopolitics respond? There are lots of unknowns and the press conference at 18.30 will be eagerly watched.
Ahead of the Fed announcement we have the ECB’s Lagarde speak, as does Lane, De Cos, and Schnabel, and Villeroy. We also get Eurozone consumer sentiment. Have a good day.
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