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Bullet Report: The Calm Before the Storm?
Posted On 20 Sep 2016
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It was a quiet session yesterday, and we expect another one today, as the market prepares for 2 very important news events. Bank of Japan and US Interest rate decision is out tomorrow, and it is unlikely that market participants will engage in too much risk before those events. In the US, markets are pricing in a 12% probability of a 25bp rate hike tomorrow and a 62% probability of a rate hike by the end of the year.
Currencies: Major Currencies are taking a pause head of the 2 events tomorrow. USDJPY dropped to 101.70 about 0.5% lower than Friday, although still in a tight range. The EURUSD rose to $1.1190 from Monday’s low of $1.1149, which was its lowest level in two weeks. The GBPUSD pound edged up to 1.3090, recovering from 1-month low of $1.2996 touched last week after the Bank of England left the door open to a further cut in interest rates by the end of the year. While the overwhelming consensus is for the Fed to hold rates steady this week, some market players expect it to drop a clearer hint that it is ready to raise rates.
Stocks: Stocks in Asia are mixed, as investors await the outcomes of tomorrow’s meeting. Markets have been between gains and losses for the past 2 weeks. Japan’s Nikkei erased earlier losses and closed and added 0.1% as trading started again after a public holiday yesterday. US stocks closed also flat after trading much higher, in a volatile session ahead of the Central Bank Policies.
Oil and Gold: Crude oil dropped 0.5% to $43.57 a barrel, while Brent dropped 0.3% to $45.82. Oil had rallied on Monday before dropping on skepticism over Venezuela’s bid to talk up a potential OPEC output freeze, and on indications U.S. crude stockpiles had risen last week. Gold added 0.2% to $1,315.8 an ounce, on expectations that the Fed will not change rates.
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