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Counting down to the Fed meeting

The focus remains on geopolitical risks surrounding the weekend Saudi Arabia attacks seeing the greenback itself reclaiming some strength into the week.

Greenback strength

Ahead of the Fed meeting commencement this Tuesday, we have seen the greenback clawing back some strength. In particular, the US dollar index, measured against six major currencies, had edged up from support with the sustained worries over geopolitical risks boosting this haven asset. Supporting this had also been the series of economic releases at the start of the week including China’s industrial production which fell to the softest growth rate since 2002, and the disappointment seen in New York area manufacturing index.

While risk sentiment had largely driven the moves here, we are also counting down to the Fed meeting conclusion for September. One suspects that we may find little surprises out of the upcoming meeting given the forgone conclusion of another 25-basis point rate cut and a largely consistent rhetoric from the Fed in acting as appropriate to ‘sustain the expansion’. The contention would instead be with the likes of the dot plot from the Fed’s summary of economic projections, one to assess the alignment of the Fed with the wider market. The potential for a disappointment past the 50-basis point expected for the rest of the year may be one to see the greenback remaining supported, one to watch.

Asia open

A lacklustre trade continues to be the expectation for Asia markets going into Tuesday, following in the footsteps of Wall Street. Early movers in the region including the likes of the ASX 200 and the Nikkei 225 were both seen in moderate red this morning, awaiting the rest of Asia markets to fall in line with the decline. This was despite the latest positive news on trade ranging US and Chinese official’s expected meeting in the coming week and an initial trade accord achieved between the US and Japan, perhaps lacking concrete substance to enthuse the market.

Separately, Singapore’s August non-oil domestic exports arrived slightly better than expected at -8.9% year-on-year against the -12.2% consensus. This marks the sixth consecutive month in which we have seen the reading submerge in negative territory, though perhaps not a surprise seeing the leading indicators out of China earlier.

Look to the slew of releases prior to the start of the FOMC meeting with Australia’s home price index and the September German ZEW survey in the mix.

Yesterday: S&P 500 -0.31%; DJIA -0.52%; DAX -0.71%; FTSE -0.63%

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Keep an eye on FOMC opportunity

Find out how FOMC meetings can affect the markets ahead of the next one on 15-16 December 2020.

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