The FOMC will dominate this week’s headlines as investors anxiously wait to see if the committee will stun the markets and raise rates this Wednesday. The markets imply a 20% chance of a rate hike this week and just over 50% chance of a rise before the year end. Expectations are that the Fed will leave rates unchanged, but will release a slightly hawkish statement possibly hinting at a December rate rise. All will be revealed on Wednesday evening.
Yesterday, markets continued to digest the bearish Brexit comments of First Minister Alex Salmond, and the EU members of the Visegrad Four (Poland, Czech Republic, Slovakia and Hungary). Salmond predicted that the UK will see another Scottish Referendum in 2018 and comments made by members in the Visegrad Four suggested they would veto any Brexit deal if it limits people’s right to work in the UK. The combination of the two comments sunk the Pound over the weekend, pushing GBP/USD and GBP/EUR down by nearly 2% since Friday evening.
Today, the Australian Reserve Bank minutes will be released. The new governor, Philip Lowe has reaffirmed the central bank's official 2-3% inflation target, saying now is not the time for radical monetary policy experimentation. There will be a raft of US data releases in the form of housing data, month-on-month building permits and housing starts. The figures should give us an insight into consumer activity. This is due to new home acquisitions being associated with a rise in sales of "big ticket" durable goods. At the end of the UK trading day, Bank of Canada Governor, Poloz will speak. He is expected to highlight ongoing softness in exports despite a weak currency, which could suggest a downgrade to the bank’s economic growth forecast at its rate announcement in October.