The broad markets have largely turned cautious ahead of tomorrow’s FOMC Statement. While the FX markets found early volatility on Monday as they priced in the news from the States that Larry Summers was out as a candidate for Federal Reserve Chairman, investors apparently have now situated themselves and may wait patiently for tomorrow evening’s monetary policy decision announcement.
The EUR, GBP, and AUD are all within fairly muted ranges at this moment. The Single Currency is still near the higher realms of its range and if tomorrow evening’s FOMC Statement is less aggressive than anticipated, the EUR along with the other major currencies may continue to test high water marks versus the USD.
Data will remain fairly light today. The German ZEW Economic Sentiment reading was published earlier today and came in better than expected. Traders should also keep in mind that Germany will have a major election on the 22nd of September in which it will select a Chancellor and determine the Bundestag.
Gold as of this writing is near 1317.00 USD per ounce as it essentially range trades near lower values and tests support levels. The precious metal has been rather tranquil after some rather swift trading last week, but tranquility has not been the norm for Gold so traders should be ready for volatility to develop again.
All summer long investors have tried to anticipate tomorrow evening’s FOMC Statement. Equity markets have largely baked in expectations already and after so many words have been spoken about ‘what if’ traders will finally get an opportunity to see what ingredients the Fed has decided on regarding its current monetary policy and tapering. As noted here, economic data has not exactly been great. While the Fed has tried to talk up the American economy it has also had to issue warnings regarding possible hurdles. Employment has been a focal point for the Federal Reserve and it will be of interest to see how they balance statistics and interpret them into the communication it sends forth for mass consumption.
We expect more mixed messages from the Fed tomorrow. And put in the context of what has taken place regarding the decision to eliminate Larry Summers from contention for the helm of the Federal Reserve over the weekend, it appears that politics do have a certain amount of power regarding the decision on who will lead the central bank over the next few years. While Janet Yellen appears to be the most prominent name being mentioned for the job at this time it is not a certainty she will get the nomination. Point being that AdvantFinance does not expect ‘cheap money’ to disappear tomorrow, nor into the foreseeable future.
- Robert Petrucci