Today’s main event is undoubtedly the FOMC rate decision which will be accompanied by a statement in regards to future economic projections. The market widely expects the FED to increase US rates by 0.25% so an actual increase will not likely cause a lot of volatility. The main focus of market participants will be the actual projections for the new year, and how many rate increases the FED is projecting to proceed with. Indeed, fed fund futures are pricing in around 60% chance of another hike in June. However, policymakers could wait to see what president-elect Donald Trump’s initial policies are, before making a change to their expectations. Aside from the Rate decision tonight, we also will have the US release retail sales, PPI, industrial production and business inventories later in the day.
Currencies: The FX market is trading sideways, in a very careful fashion, which is expected considering we have a main news event today. As the market is extremely positioned in USD favor as can be seen by the last months, risks for the Dollar are on the downside as the event approaches, since traders decide to scale back on risk, and unload some positions ahead of the event. Indeed, leading to the decision tonight, USD has dropped slightly against most majors. Notably, the USD has been weaker versus the EUR on every FOMC meeting decision day since the December hike last year. The economic projections or “dot plot” will likely dictate whether that will change.
Stocks: US stocks extended their rally which continued to post new record highs. SP500 finished off 0.65%, similar to the Dow, while the Nasdaq finished 0.95% higher on the day. Similarly, European bourses finished higher between 0.84% and 2.49%. shares in Asia were mixed this morning, as the markets await for the FED to set interest rates with the market looking more focused on the economic projections for the near future.
Oil and Gold: After a surge in oil prices in the last few days, Oil; prices struggled to continue in the same pace after data showed that US crude inventories rose in December. West Texas Intermediate (WTI) crude oil futures were down 69 cents, or 1. %, to $52.29 a barrel at 0430 GMT. Brent crude futures were down 69 cents, or 1. %, at $55.03 per barrel. Gold rose, as the dollar value keeps falling ahead of the FOMC.