Markets and Central Banks fixated with Fed rate decision
US housing data flew under the radar with this evening’s Interest Rate Decision being the main focus. US Building permits in August missed targets at 1.170M, printing in lower at 1.139M. August Housing starts as figures missed expectations by a long way, printing at 1.142M. The Dollar ended the day trading up by 0.4%, at around the 1.2998 levels versus Sterling.
All attention will be on the federal reserve interest rate decision with other Central Banks waiting for the outcome before acting. Dollar moves today are likely to be linked to positioning ahead of the announcement. With the market pricing in only a 20% chance of a rate hike, a rate hike will cause volatility.
The Pound was confined to relatively low ranges yesterday and continued to weaken as it hit 4 week lows against both the Euro and the Dollar. Sterling was hampered by Brexit related, long term growth/earnings outlook for UK companies. The newest Bank of England Monetary Policy Committee Member Michael Saunders hinted he may be more hawkish than dovish and that the UK’s prospects were better than economists are predicting. He also noted that wage growth justified higher rates, a rise in unemployment justified rate cuts, but overall a hawkish sentiment prevailed.
The Euro recorded a second straight day of gains versus the Pound as it ended the European trading session up by 0.2% against the Pound. There was little data in the Eurozone, but todays Bank Of Japan interest rate decision will increase speculation that the European central bank will push longer term yields higher which will lessen the impact of negative interest rates and ease the bond buying programme.The Euro ended the session trading around the 1.1640 levels.
Data To Watch: 9.30am GBP Public Sector Net Borrowing (Aug) 7pm US Fed Interest Rate Decision. 7.30pm FOMC Press Conference.