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Given the S&P tested new highs in the preceding two session, while the Dow set a new closing record yesterday, it’s understandable that there are signs of caution on Wall Street today just ahead of a potentially market-moving event such as the announcement from the latest FOMC meeting.
With under an hour to the release of the Fed decision, the Dow was flat at 15,680 and the S&P 500 was down 0.22% at 1767.9.
Today’s economic releases continue to support the notion that the Fed will refrain from announcing a reduction in its monetary stimulus. The ADP employment report showed private payrolls rising by a lower-than-expected 130,000 in October, with a downward revision to September’s number to 145,000 from the previously-reported 166,000.
The official government labour report isn’t released until the end of next week, on account of a delay caused by the shutdown, but today’s report is a discouraging sign.
Inflation is looking steady, meaning there is no pressure from this angle on the Fed to hurry with a taper: the September Consumer Price Index rose 0.2% at the headline level, but just 0.1% once the volatile components of food and energy prices were stripped out. Year-on-year, the overall CPI declined from 1.5% to 1.2%, while the core rate dropped from 1.8% to 1.7%.
The expectation of extended stimulus appears to be already priced in by the forex markets, with movements in dollar crosses being low-key today. Just ahead of the Fed decision, EUR/USD was up just 0.15%, while USD/JPY was broadly flat.