市场资讯及洞察

It’s that time again, the looming US FOMC meeting is upon us. Once again, investors and analysts are confident that they know the result. With the rate currently at 5.50%, markets have priced in a hold, with the CME FedWatch Tool giving it a 99.6% probability of the second consecutive hold for the Fed.

Let’s explore that 0.4% chance that a hold might not happen. As you can see from the above chart, there has been a spectacular rise in the Fed Funds Rate since early 2022 when US inflation started to soar. Each Federal Open Market Committee (FOMC) meeting that occurs, the members assess economic conditions, monetary policy and make the big decision on what to do regards interest rates.

The rapid ascent of the Fed Funds Rate has been an attempt to tame the post Covid-19 inflation, with a fair bit more to go. While inflation is easing, recent GDP data in the US signaled a growing economy, which would be a key talking point in the upcoming FOMC meeting. Let’s look at a few scenarios on the markets for this month’s FOMC meeting.

Hold – With inflation easing, and no major data released in the past month to indicate a reversal, markets have priced in a hold at November’s meeting. As this has been widely accepted, this has been priced into the markets, and I’d expect minimal movements in both US equities and the USD if rates are on hold. Cut – With inflation still above the Fed’s target range, a cut is very unlikely.

However, in the slim chance they decide they’ve done enough and are ready to take their foot off the accelerator, we could see plenty of volatility across both the US equity markets and the US Dollar. Signalling that the Fed thinks the worst is over, US equities could rally on the newfound confidence that they’ve made it through the uncertain times, and cost of living may begin to ease. A cut could see USD lose strength, as investors may look to rotate into other higher yield currencies.

I’ll be watching the major USD pairs for plenty of volatility if a cut is seen. Hike - While inflation is easing, there are still signs the economy isn’t ‘breaking’ as much as it should be with such high rates. Recent US GDP data came in above forecasts, which I’m sure is being heavily looked at in the November FOMC meeting.

In the chance the Fed believes further work is needed and hike, I’d expect a short-term sell-off in the US equity markets and a rally in the USD. With the US Dollar Currency Index (DXY) bouncing between a range of around 105-107 for the past month, November’s FOMC meeting might be enough to kick it one direction if we see either a Hike or a Cut. As analysts generally price in the expected decision prior to the announcement, eyes generally shift to the FOMC statement and press conference after the data is released.

The statement and press conference sees Fed Chair Powell discuss the decision and gives an indication on their plans. Analysts will be analysing every word to try and get hints on the Fed’s future movements and will be looking for either more aggressive ‘Hawkish’ language or more cautious ‘Dovish’ language. I’m bracing for volatility across the USD pairs during this speech, and the language used will determine the direction.

Hawkish language can see strength in the dollar, while dovish can see weakness.

The first week of the new quarter has so far been an interesting one, rampant US treasury yields breaking out to 16-year highs, a USD that just keeps going up and now it seems the Japanese Ministry of Finance is directly intervening in currency markets. USD rose to a high of 107.35 on the back of a surge in yields and a hawkish US JOLTS report which showed the US labor markets resilience. Fed member Mester also spoke noting the Fed will likely need to hike rates one more time this year adding to the higher for longer narrative.

The USD did dip later in the session on what seemed to be a Japanese FX intervention, DXY still holding the key 107 level though. JPY was again weak early in the session with USDJPY hitting a high of 150.16, above the “line in the sand” at 150. The weakness dramatically reversed on what could only be a BoJ intervention in the FX market seeing USDJPY sharply move lower 3 big figures in a heartbeat, hitting a low of 147.31.

There has been no official confirmation this was an intervention but with recent jaw boning from Japanese officials threatening just that, it seems obvious it was. USDJPY recovered after the dust settled to reclaim the 149 level, but from my experience this won’t be the last intervention so USDJPY longs should tread with caution from here. AUD underperformed with the Aussie struggling against a strong USD, sour risk sentiment and post RBA where the Aussie Central Bank kept rates on hold and gave nothing extra for the hawks in their statement.

AUDUSD dipped below 0.63 before finding some support around the Nov ’22 lows and retaking the 0.63 support level for now. Today’s economic announcements:

USD traded in a tight range on Tuesday despite a big move higher in treasury yields after a beat in US retail sales figures, the headline rising 0.7% M/M vs 0.3% expected. DXY whipsawing within a contained range, hitting a high of 106.52 on the initial reaction to the retail sales figure, but quickly paring gains to hit a low of 106.02. Fed member Barkin Fed’s also spoke noting that the FOMC will have a good debate when asked about the chance of a Fed hike at heir November meeting.

Looking ahead, Fed speakers are set to continue, ahead of Chair Powell on Thursday, also any further geopolitical updates will be closely watched by USD traders. AUD and NZD were divergent on Tuesday, with the Aussie the G10 outperformer and the Kiwi the laggard. AUDUSD continuing its bounce off the major support at 0.6286 to rally to a high of 0.6380, helped along by what was seen as hawkish RBA minutes released during the session.

NZDUSD on the other hand struggled after a not as hot as expected NZ CPI, NZDUSD dipping to test the October lows at 0.5871 before finding some support.. AUDNZD surged higher, retaking the key 1.07 level and within a whisker of also breaching 1.08 JPY faltered against the USD despite seeing strength early in the session after a Bloomberg report that the BoJ was considering revising their inflation forecasts higher. The surge in the Yen swiftly faded with yield differentials pushing USDJPY higher, to hover just below the 150 “intervention zone” Today’s calendar below:

USD surged higher on Thursday, with DXY having its second biggest daily gain since March, reclaiming the big figure at 106 and holding above its trendline support. Hotter than expected CPI readings with the M/M rising 0.4% (exp. 0.3%) and Y/Y coming in at 3.7%, above the 3.6% consensus got the Dollar rally going, but a dismal US 30yr auction later in the session saw long end yields surging higher, further boosting the Greenback. Cyclical currencies AUD, NZD and GBP were the underperformers, driven lower by a sour risk sentiment and USD strength rather than anything currency specific.

AUDUSD and NZDUSD tumbling to 1-week lows and nearing the bottoms of their recent ranges of 0.6308 and 0.5926, respectively, from earlier peaks near the top of the range of 0.6430 and 0.6025. GBPUSD also tumbled, breaking below 1.2200 amid the aforementioned negative risk sentiment and surging USD. There were some mixed UK macro releases and BoE members highlighting the extent of possible rate hikes to come but this had little effect as GBPUSD fell to a session low of 1.2173 a whisker above Monday’s low of 1.2163.

Gold finished the session down but considering USD strength and surging yields held up admirably as haven flows helped lessen the damage. XAUUSD also finding some support at the 78.6 Fib level at 1866. Today’s calendar is fairly light, Chinese CPI and US consumer sentiment being the highlights.

The ongoing sell-off in the US bond market has set the tone in FX and wider risk markets on Tuesday in an otherwise very slow news day. The USD has continued to grind higher against the higher yield backdrop with the US Dollar Index (DXY) adding to Mondays gains pushing above the 106 level, tracking yields higher. The Fed’s recent “higher for longer” statement still supporting yields, worries of a US government shutdown looming and more hawkish comments from the Fed’s Kashkari on Monday also giving a tailwind to yields and the US dollar.

EURUSD saw further declines, first breaking support at the May 31 swing low, before also dropping below the psychological 1.06 level, with the major support of the Jan/Feb/Mar lows at 1.0521 very much in play. USD strength was the main driver but also weighing on the EUR was weak world merchandise trade volumes data, the eurozone suffers from a declining trade environment, as does the Euro. GBPUSD also continued to decline after last week’s surprise hold from the Bank of England.

Ongoing USD strength, another hit to the cyclical GBP is the softening risk sentiment in global markets amid a possible US government shutdown. GBPUSD breaching the 1.22 support level and looking little in the way of technical support levels can be expected before the 1.2000/2075 area. USDJPY stalled from its recent grind higher after climbing just shy of the 149.00 handle, another round of the familiar jawboning from Japan’s Finance Minister Suzuki holding it in place for now, JPY also helped somewhat by the weakening risk environment seeing haven flows to the Yen.

The USD sell off continued Thursday moving in lockstep with yields again ahead of today’s key non-farm payroll figure. Unemployment claims came inline and had a limited impact as it was yields driving action in the USD. DXY dropped to close at the lows of 106.32 from earlier highs of 106.86.

So far this looks like a technical pullback from overbought levels, with a strong support at the lower trendline around 106.10 as traders turn to watch todays NFP figure. EUR was propped up once again by USD weakness, with EURUSD testing the key support at 1.05 several times before rallying to hit a high of 1.0558. ECB members de Guindos and Kazimir spoke, with the former saying the current level of rates will help tame inflation, but noted the ECB is data dependent and it is premature to discuss rate cuts.

While Kazimir noted that the September EZ core inflation confirmed ECB expectations, and reiterated he believes the last rate hike was the final one. JPY firmed against the USD with USDJPY dropping below 149.00 led by the softening of US Treasury yields. Traders seemingly still wary of a push above 150.00 seeing potential Yen intervention following the “flash crash” on Tuesday when the pair poked above this level.

AUD and NZD were bid with outperformance in both currencies, bolstered by the improved risk sentiment and lower US yields. AUDUSD rose above 0.6350 and NZDUSD rose above 0.5950, the Kiwi marginally outperforming the Aussie seeing the AUDNZD cross rate drop below 1.07 again, the pair has found some short-term resistance at the 1.07 level this week with cross make a few attempts to break and hold but so far being rejected. Today’s calendar is dominated by the always exciting NFP, a hot figure here will test the markets pricing of interest rates and should see the yield/USD rally recommence.