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Traders tread lightly ahead of the Fed

Stock markets in Europe are trading sideways as volatility is low as dealers are waiting for the update from the Federal Reserve this evening. 

Kingfisher shares are up 6.5% today after the company announced first-half profits which topped analysts’ estimates. The UK division is the stand-out performer of the business, and the French operation is performing in line with the company’s expectations. The stock hit a 3 month high this morning, and it is nearing its 200-day moving average at 323p. Should we see that metric being exceeded, it may pave the way for a return to 369p – the May high.

Today’s session will be dominated by the countdown to the Federal Reserve’s meeting at 7pm, and the press conference at 7.30pm. Interest rates are expected to remain on hold, and it is likely that we will hear about the beginning of the reduction of the balance sheet. Some traders feel the balance sheet will start to be trimmed next month.

Dealers are still much divided over whether the Fed will raise interest rates in December or not. Deciphering the language of Janet Yellen, the Chair of the Fed, will be the focus of the trading session.

A rate hike in December seems unlikely given we don’t know what the future membership of the Federal Reserve will be in a few months, the debt ceiling debate will be conducted in that month, and we don’t know the impact of Hurricane Harvey and Irma

The GBP/USD traded above the $1.36 mark after UK retail sales surged in August. On a month-on-month basis retail sales jumped by 1%, while traders were expecting an increase of 0.2%, and the previous report was 0.3%. On a year-on-year basis, it rose by 2.4%, and economists were expecting 1.1%, and the last report was 1.3%.  

We are expecting the Dow Jones to open 15 points higher at 22,385, and we are calling the S&P 500 up 1 point at 2507.

At 3pm, the US will announce the existing home sales data for August, and the consensus is for 5.46 million, and that would be an improvement on the previous month’s reading of 5.44 million.   

 

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Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.