European Outlook: Asian stock markets ex-Japan are mostly slightly down in the wake of the as-expected Fed announcement yesterday. Japan managed to outperform and the Nikkei is up 0.58%. U.S. and U.K. stock futures are heading south as attention turns to the BoE meeting today, which is expected to bring the first rate hike since 2007. Investors will are also awaiting the decision on the next Fed chair and U.S. job data at the end of the week. Against that data releases are likely to fade into the background. They include the final readings of Eurozone manufacturing PMIs as well as German jobless numbers and the U.K. construction PMI.
FX Update: The dollar has traded softer following reports run by MarketWatch and Bloomberg saying that Fed Governor Powell will be nominated to the Fed Chairmanship position later on today. Powell is seen as one of the more dovish candidates for the top job at the Fed, similar to Yellen. Yesterday’s conclusion of the FOMC, meanwhile, predictably left policy unchanged, and while the Fed upgraded growth projections, core inflation was deemed to be remaining “soft.” The statement was consistent with an already discounted 25bp rate hike in December. This backdrop imparted a modest upside bias on EURUSD, which logged a one-week high at 1.1671 in Asian trade, while USDJPY declined under 114.00, leaving a three-day high at 114.28. The dollar also ebbed versus the Australian and other dollar bloc currencies, and most other units.
Main Macro Events Today
- BoE Inflation Report and Monetary Policy – Following the BoE’s guidance, markets are fully expecting the central bank to make its first hike of the repo rate in 10 years, taking it to 0.50% from 0.25%. This would undo the ’emergency’ rate cut of August 2016, which came amid the panicky, although short-lived, period following the vote to leave the EU. Today’s MPC announcement will be accompanied by the publication of its quarterly Inflation Report.
- BoE Governor Carney- speaking at 12;30 GMT along with other MPC members, about the Inflation Report, in London.
- US Jobless Claims – Expectations – 2K rise from 233K last week at the Alternative Reference Rates Committee Round-table.
- Fedspeak – Governor Powell and Fed’s Dudley are due to speak today
Charts of the Day
Support and Resistance Levels
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