Stocks, commodities and currencies prepare for big central bank meetings this week
Stock markets in North America and Europe held on to the positive momentum coming out of yesterday’s Asia Pacific rally. USD retreated with traders increasingly feeling a Fed rate hike is unlikely this month but without enough conviction to really move the markets.
Crude oil started the day off strong with WTI and Brent gaining over 2% but then giving a lot of it back in the afternoon. Speculation about what could come out of the upcoming side meeting between big producers at an upcoming conference in Algeria has picked up on reports that OPEC could call an emergency meeting to ratify any agreement reached at the informal meeting. Renewed fighting in Libya delaying an expected big ramp up in exports has also helped to boost prices, but this could reverse if hostilities ease again. Energy stocks and oil sensitive currencies pared their gains as the commodity price corrected.
Speculation on what could happen at this week's FOMC and Bank of Japan meetings has also influenced trading today. USD is dropping back as speculation rising US inflation could force the Fed to raise rates eases. I still think there's a 40% chance of a rate hike and a 60% chance the Fed will use the statement, press conference and projections to hint toward a December increase after the election. With the Republicans having recently accused the Fed of keeping rates low to help the Democrats, this decision could have an impact on the campaign regardless of what the Fed does.
JPY has been active overnight against USD, EUR and GBP as traders try to figure out what stimulus measures the Bank of Japan may be prepared to bring in at its meeting next week and whether new stimulus would boost or undermine the current uptrend in the currency. NZD may also attract attention with the RBNZ expected to hold the line on rates Thursday am local time a few hours after the FOMC decision. RBA minutes could indicate how much pressure the RBA and RBNZ are under (or not) to cut interest rates again this year.
There have been no major announcements after the US close today.
Significant announcements released overnight include:
UK Rightmove house prices 4.0% vs previous 4.1%
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
11:30 am AEST Australia RBA minutes
11:30 am AEST Australia house prices street 5.1% vs previous 6.8%
7:00 am BST Germany producer prices street (1.6%) vs previous (2.0%)
8:30 am EDT US housing starts street 1,190K
8:30 am EDT US building permits street 1,165K
12:35 pm EDT Bank of Canada Poloz speaking
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