Greenback calm ahead of the Fed

We are approaching the business end of the week now. Focus is converging on the USD as we await the results from the FOMC meeting.

Source: Bloomberg

While equities are upbeat, there is a sense of caution in treasuries and the USD ahead of the Fed meeting. The market is really divided on how the Fed statement will play out, given the global growth concerns and inflation risks. The median consensus call for a Fed funds rate hike is Q2 of 2015 (52%), with 29% for Q3 and 8% for Q1.

The rest feel Q4 or 2016 are the most likely options. This meeting will help shape expectations but I suspect December seems a more likely time for firm action. The December meeting comes with updated projections – perhaps the Fed will look to use this as a good opportunity to make any changes.

USD/JPY momentum positive

With markets risk-on, the USD lost ground against some of its peers, except the yen. USD/JPY clawed its way back above ¥108.00 and is just testing last week’s highs. I feel this will be the pair to watch this week, given the Fed and BoJ are both meeting.

Over the past couple of days we’ve actually had some positive releases out of Japan as retail sales and industrial production both came in ahead of expectations. This still hasn’t resulted in any strength for the yen, which I feel is due to traders not wanting to be caught out ahead of the BoJ meeting. Momentum is also to the upside at the moment – a break above ¥108.35 could lead to further near-term gains.

Click to enlarge

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.