When the Fed reveals its interest rate decision at 2am Singapore time tomorrow, a 25bps rate hike is all-but certain, with probability sitting at close to 98%.
Investors will also be looking for clues over the Fed’s plan to cut its balance sheet, which is expected to start at the end of this year.
The US dollar index slid for a third consecutive day to the 96.9 area, partly due to a strong rebound in sterling overnight. The S&P 500 index climbed 0.45% and closed at a record high of 2,440 points. The Nasdaq also rebounded after its two-day selloff.
Sterling rebounded 0.8% against the greenback last night to the 1.275 area, on both strong inflation numbers and hopes that Theresa May will reach a deal with Northern Ireland’s DUP. The stronger pound weighed on the FTSE 100, sending it down 0.15% while most European equity markets closed higher last night.
Technically, GBP/USD’s 10-Day Simple Moving Average and SuperTrend indicators were both trending downwards, suggesting bearish momentum will be dominant in the near term. The Relative Strength Index (RSI) has rebounded from 30%, signalling a technical rebound. Immediate support and resistance levels, as suggested by the Fibonacci Retracement, can be found at the 1.270 and 1.315 areas respectively.
Separately, oil traders will monitor the US DoE crude oil inventory data at 10:30pm Singapore time tonight. The market expects a 2.5-million-barrel drop in US commercial inventory. Any big variation from this expectation will likely spike volatility in crude prices.
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