Market’s anticipate FOMC statement

Yesterday’s markets

27th July 2016

  • USD CB Consumer Confidence: 97.3
  • USD New Home Sales: 592K
  • AUD CPI q/q: 0.4%
  • AUD Trimmed Mean CPI q/q: 0.5%

Yesterday began on a somber note, as we awoke to the tragic events that happened in Japan on Monday night. A risk averse move occurred Tuesday morning after these events, strengthening the Greenback and Euro. In terms of economic data, firstly the Bank of England policy maker, Martin Weale, addressed the market. Weale was extremely dovish citing that the UK economy needs stimulus immediately, as Brexit has led to a “dramatic deterioration” in short term indicators. The next policy meeting at the Central Bank is scheduled for August the 4th, where markets expect some sort of stimulus announced by BoE Governor Mark Carney. 

Across the pond, the US released two pieces of high tier data which beat both market forecasts. Consumer Confidence increased in June and was relatively the same for July, registering at 97.3. This beat the market’s expectation of 95.6, just shy of June’s reading of 97.4. Also, New Homes Sales released a bullish figure simultaneously with the Consumer Confidence release. New Home Sales jumped to a seven year high, as sales rose by 3.5%, up by 592k. This proved that both lending and spending in the US is gathering further momentum on further solid economic grounding.

Today’s markets

26th July 2016

  • EUR M3 Money Supply y/y
  • GBP Prelim GDP q/q
  • USD Core Durable Goods Orders m/m
  • USD Durable Goods Orders m/m
  • USD Pending Home Sales m/m
  • USD Crude Oil Inventories
  • USD FOMC Statement
  • USD Federal Funds Rate

Today is possibly the biggest day of the week as the focus switches to the Federal Reserve. The Fed are expected to give their rate decision followed by the FOMC statement this evening. Whilst US data of late has decreased any expectation of the Fed tightening monetary policy, the markets will look to see what the Fed’s view is and if a rate hike is still on the table this year. In the morning, the UK will release its first reading of Q2 GDP, markets expect GDP to grow slightly to 0.5% from 0.4%. However, after the UK’s recent poor data releases this could fail to meet expectations and therefore put the Pound under pressure once again.