Waiting for the Fed

​​​​​Today's news headlines:

  • ‘MPs vote to hold general election on December 12’. Last night, MPs voted 438 to 20 in favour of holding a general election on December 12th 2019, with Labour dropping its opposition to the motion. Despite the overwhelming majority, almost 200 MPs abstained in last night’s vote due to their preference of holding a second EU referendum, or were Labour MPs fearful of an election rout. (Financial Times)
  • ‘US-China trade deal might not be ready for signing in Chile’. Negotiators from the US and China have been working on a text for an agreement to be signed by Trump and Jinping at the Asia-Pacific Economic Cooperation summit in Chile next month. In recent weeks, various US officials have said good progress has been made on trade negotiations. While a complete text may not be ready next month, officials stress it doesn’t mean negotiations are falling apart. (Thomson Reuters)

In an upbeat mood

The Trump impeachment is finding new legs after a military source confirmed the transcript of the President's call with the Ukrainian President was missing crucial information; yet, it doesn’t matter. The US House has voted to sanction Turkey for the recent invasion of northern Syria; again, it doesn’t seem to matter. The market appears at ease despite the latest twists in these key themes. Perhaps it’s the passage of the UK general election on December 12th. Can that be it? Surely no one is under the illusion an election will be the magic bullet. Perhaps US earnings season—which outperformed its trade-war depressed estimates—is the cause of this equanimity; maybe. There has been little economic data of note since last week, so perhaps it’s just the patient wait for the Federal Reserve press conference this evening. 

Bottom line: There is a stillness to markets in today's open and lack of reaction to negative headlines. This suggests the worst is priced in already and markets are waiting to pounce on positive stimuli. A slightly dovish Fed would support markets better—implying lower rates—but secretly we’re hoping policymakers project confident tone about the environment, despite the administration’s criticisms.

GBP/USD

Cable hit resistance at the 1.29 level in yesterday’s trading as well as in the London open this morning, indicating a sustained Sterling climb is unlikely in the short-run. With a December general election now in the diary, Brexit uncertainty is heightened so the pair may be stuck in a tight range in the short-term. GBP/USD may find support at the 1.2715 200-daily moving average.

GBP/EUR

The currency cross continues its 60-pip trading range this morning, hitting resistance at the 1.16 level on the London open. With short-term Sterling volatility now expected to fall following news of a December general election in the UK, the pair could continue to trade in a tight range.

EUR/USD

Yesterday, the common currency broke out of its recent downward channel climbing above 1.11 and achieving a closing price above the key level. With a focus on the Federal Reserve this evening, the pair may trade flat in London’s session as investors await the Fed’s monetary policy announcement.