Volatility Ahead of the November FOMC Meeting
After achieving substantial gains versus its key competitors on Tuesday, the US Dollar has been wobbling today, as it started making gains in the European session but then reversed lower in the US session after the US economic data, only to turn around again. The US economic calendar included the ADP Employment Change which was positivee and the JOLTS Job Openings for September which also beat expectations. But the ISM Manufacturing PMI data for October showed that this sector fell deeper into contraction last month.
The 10-year yield has been moving in a tight range around 4.90%. Later in the evening, the Federal Reserve (Fed) will publish monetary policy choices, and Chairman Jerome Powell will hold a news conference to discuss the outlook. Analysts dive into the anticipated FED decision, noting that, while the FOMC will most likely hold the the funds rate at 4.50%, market investors should be on the lookout for any deviations from the Federal Reserve’s usual rhetoric, which could indicate another hike soon or the end of the hiking cycle.
The market expects no rate rise, and if this happens, it will be the first time the FOMC has not made consecutive changes since the tightening cycle began. The FED’s lack of action may raise concerns about whether this “skipping” will translate into a genuine “pause” or the conclusion of the tightening cycle. However, FED Chair Powell may be reluctant to convey strong signals indicating a stop or cessation of tightening.
FED chairman Jerome Powell is likely to restate the economy’s strengths, current inflation levels, and the need to keep the policy rate tight. The sentiment of ‘higher for longer’ is likely to be stressed as well. The market presently assigns a 25% likelihood of a December rate rise.
Depending on Powell’s comments, the rise might continue. Will Powell mention possible inflationary pressures arising from the Israeli-Hamas conflict in the Middle East? Powell’s perspective on the job market’s continued resilience, particularly with wage inflation remaining strong, will be critical. The emphasis on financial conditions tightening, spurred by rising long-term UST bond rates, will be critical. A significant question is whether Powell agrees with ECB President Lagarde on the faster-than-expected transmission pace.
ABOUT THE AUTHOR
See More
Sidebar rates
Add 3442
Add 3440
Join 350 000+ traders receiving Free Trading Signals
Alerts
Rates
Calendar
Signals