US indices held steady overnight with the Dow and S&P at all-time highs and the NASDAQ just below a high of its own. Overseas, the Dax, FTSE and Nikkei have also been steady as traders await today’s Fed meeting and tonight’s Bank of Japan meeting. 

Traders took President Trump’s speech to the UN (which had some sound bite fireworks like threatening to totally destroy North Korea but otherwise no major surprises), in stride with gold and the Yen mixed as they try to stabilize at lower levels following a recent shakedown. 

Sterling is back above $1.3500 on the bank of a very strong UK retail sales report and amid reports Foreign Secretary Boris Johnson plans to stay on.  AUD picked up overnight amid some hawkish talk out of the RBA while NZD rallied on signs the incumbent National party is leading heading into this weekend’s New Zealand election. 

The two day FOMC meeting started today with the decision due tomorrow afternoon. The Fed is widely expected to announce the start and timetable for its balance sheet reduction program. Traders may also look to the statement, member projections and press conference for hints as to whether A December interest rate hike is still on the table. The Fed’s party line has been for three rate hikes this year and they have done two so far. Recent overtures and deals between the White House and the Democrats suggest that the political window for the Fed to act may remain open through the end of the year.   

The USD has been sinking in recent weeks suggesting the street is expecting a dovish Fed so any hawkish signs could spark a rally in the greenback. Chances seem low but if we did see a rate hike now, it could really rattle traders as a hawkish surprise.  

Traders may also start to look ahead to the forecasts for 2018 in the dot plot. Historically once the Fed has embarked on a program of rate hikes or cuts or QE, the central bank has kept it going for a while. That being said, the Fed is currently in a state of transition with several governor spots still open at the Fed plus Vice Chair Fischer leaving next month and questions over whether Chair Janet Yellen will stay on beyond the end of her term in January. As such, stay the course median forecast of 3-4 hikes for 2018 (keeping the party line of three to give them some flexibility) would not be a surprise, less would be a dovish surprise, more would be a hawkish surprise. 

WTI crude oil bounced back overnight, gaining 1.1% in another run at $50.00. API oil inventories rose by 1.4 mmbbls which is less than what the street is expecting for DOE tomorrow. API gasoline inventories fell by 5.0 mmbbls. With traders starting to look past the hurricane effect, oil may remain active though today’s DOE reports. The street is expecting Doe to report a 3.4 mmbbl increase in oil inventories and a 2.1 mmbbl decrease in gasoline inventories.  

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