Despite limelight, Fed shies away from interest rate press conference
Market focus today will be firmly on the Federal Reserve this evening as the rest of the economic calendar is thin throughout today. Rate hike…very unlikely. Traders have now pushed any chance of a rate lift off back to March 2016. Nevertheless, the majority of the policymakers in the Fed have openly expressed their appetite to increase rates this year.
Real insight into their thinking and direction is likely to be illustrated in the statement issued after the meeting by the Federal Open Market Committee as opposed to the usual press conference. Dovish rhetoric is likely to see a slight weakening in the Dollar, though this sentiment is possibly already priced in following recent underwhelming economic data, while a hawkish tone and urgency to hike before 2016 could boost the Dollar, going against market expectations.
U.K. economic growth cooled as manufacturing contracted for a third quarter and construction shrank the most since 2012, a sign that Britain may be suffering from the now infamous “global headwinds”. Gross domestic product (GDP) expanded 0.5 percent in the three months to September from the previous period, when it grew 0.7 percent, the Office for National Statistics said in London on Tuesday. The median estimate in a Bloomberg News survey of economists was 0.6 percent. Construction shrank 2.2 percent, manufacturing contracted 0.3 percent, while overall production growth cooled to 0.3 percent from 0.7 percent in the second quarter.
The Euro has fought off Sterling’s attempts to consolidate above the 1.3900 mark and EURUSD continues to head lower as German bunds reached their lowest level in five months. European traders are now betting that a cut in the European Central Bank deposit rate and an extended version to the current QE programme is highly likely in December.
The Aussie Dollar saw softer than expected inflation, dropping nearly 1% versus Sterling and intensified the chances of a third rate cut this year by the Reserve Bank of Australia.