{"id":10259,"date":"2021-06-16T13:10:00","date_gmt":"2021-06-16T12:10:00","guid":{"rendered":"https:\/\/youtrading.com\/en\/?p=10259"},"modified":"2021-06-16T17:34:41","modified_gmt":"2021-06-16T16:34:41","slug":"markets-in-wait-and-see-mode-ahead-of-todays-key-fed-rate-decision","status":"publish","type":"post","link":"https:\/\/youtrading.com\/en\/markets-in-wait-and-see-mode-ahead-of-todays-key-fed-rate-decision\/","title":{"rendered":"Markets in wait-and-see mode ahead of today\u2019s key Fed rate decision"},"content":{"rendered":"\t\t
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US equity indices<\/a> saw a very modest pullback from all-time highs levels during yesterday\u2019s session amid caution, profit-taking and general position adjustment ahead of this evenings key FOMC rate decision and major index futures continue to trade with a degree of caution in pre-market this morning; E-mini S&P 500<\/a> futures currently trade in the 4230s, about 30 points below yesterday\u2019s record high levels in the 4260s. European stocks<\/a> also see subdued trade this morning and, like their US counterparts, are for the most part trading just off record high levels, while Asia Pacific equities saw a slightly more negative session with underperformance in major Chinese equity bourses in response to further criticism aimed at China from Western nations, this time with regards to the country\u2019s actions in the South China sea, as well as amid news that the US is considering sending a permanent naval task force to the region. As is the case in US stock markets, US bond markets are also subdued, with 10-year yields<\/a> currently around 1.49%, well within ranges of recent days.<\/p>

Looking ahead, today\u2019s FOMC rate decision outcome will of course be the next major driver of market sentiment; the bank is not expected to make any major policy changes (the federal funds target range will be left at 0.0-0.25% and asset purchases will remain at $120B per month), with focus on 1) any new information on the current QE programme tapering discussion that might inform expectations as to when the bank will announce a winding down of its QE programme (markets current expect tapering to begin in Q4 2021-Q1 2022) and 2) on the Fed\u2019s new economic forecasts and dot plot, the latter of which will provide fresh insight to inform expectations as to when the Fed might start lifting interest rates (money market pricing currently expects hikes to start at the end of 2022\/start of 2023 versus current Fed guidance of no hikes until 2024) \u2013 GDP and inflation forecasts are likely to see a lift to reflect recent strong activity and inflation reports, while unemployment forecasts will probably remain unchanged in wake of the last two month\u2019s not as strong as expected labour market reports. The Fed will likely reiterate its stance that higher than target inflation this year will be transitory, an argument that markets seem to be buying into at the moment (judging by inflation expectations, which remain in the mid-2.30s%, well below recent peaks above 2.6%).<\/p>

In terms of commodity markets, industrial metals continue to crater, with the Bloomberg Industrial Metal subindex (BCOMIN) down for a second day in a row, reflecting further concerns about a crackdown on recent price rises in the sector by Chinese authorities. For reference, China yesterday confirmed recent speculation that it would release reserves of copper<\/a>, aluminium and zinc. Elsewhere, crude oil<\/a> prices remain buoyant, with WTI still comfortably above $72.00 and Brent<\/a> currently close to $74.50, which put them both, needless to say, very close to recent cycle highs. Yesterday evening\u2019s weekly API inventory data is helping keep prices supported given headline crude oil stocks saw a much larger than expected draw, though traders will be looking to official weekly US inventory data (released by the US EIA at 1530BST) for confirmation. Finally in the commodity sphere, precious metals are subdued in tandem with subdued price action in FX and bond markets ahead of tonight\u2019s FOMC, with spot gold<\/a> close to but just above $1850 and spot silver<\/a> in the $27.80s.<\/p>

Turning to FX markets; unsurprisingly ahead of the FOMC meeting, the dollar is flat, with the DXY<\/a> almost bang on the 90.50 level. EUR, CAD, JPY and CHF are all flat versus the buck, with EURUSD<\/a> around the midpoint of yesterday\u2019s intra-day 1.2100-1.2150 ranges, with USDCAD<\/a> having pulled back modestly from recent multi-month highs above 1.2200, USDJPY<\/a> is close to 110.00 and USDCHF<\/a> still consolidating just under the 0.9000 level. Aside from the FOMC, Loonie traders will also need to keep an eye on today\u2019s Canadian CPI report for the month of May, while Swiss Franc traders have the SNB policy meeting tomorrow to think about.<\/p>

NZD, AUD and GBP are the outperformers this morning, all up about 0.2% on the session versus the buck, lifting NZDUSD<\/a> back towards 0.7150 after the pair seemingly attracted some dip buying appetite when it hit 0.7100 yesterday and despite softer than expected overnight current account data for Q1 2021. AUDUSD<\/a>, meanwhile, is managed to climb back above 0.7700 despite a further pullback in industrial metal prices on further China crackdown concerns, while GBPUSD<\/a> is back above 1.4100 in wake of this morning\u2019s significantly hotter than expected UK consumer price inflation report this morning for the month of May. For reference, the headline YoY rate of CPI came in at 2.1% in May versus 1.8% forecasts, boosted by a stronger than expected MoM rise in prices of 0.6% (versus forecasts for a 0.3% rise in price). The beat on expectations was even greater when looking at Core CPI metrics. Analysts now appear to be adjusting their UK inflation forecasts for this year higher and this morning\u2019s report seems to have been taken as raising the risk of the BoE having to tighten policy sooner rather than later, hence modest upside in GBP. Note that ongoing Brexit tensions are worth watching and could continue to cap GBP gains in the short-term so long as no progress to ease tensions is made. Finally in G10 FX, the two Scandinavian currencies NOK<\/a> and SEK<\/a> are the worst performers, though specific catalysts for their underperformance are hard to find aside from, with NOK, some potential profit taking ahead of tomorrow\u2019s Norges Bank rate decision.<\/p>

The Day Ahead<\/strong><\/p>

The Fed releases its latest rate decision, along with an updated statement on monetary policy, dot-plot and new economic forecasts at 1900BST and then there is a press conference with Fed Chair Jerome Powell from 1930BST. This is, as noted, the main event of the day and markets are likely to trade subdued ahead of this event.<\/p>

We do have some interesting data points to digest ahead of tonight\u2019s FOMC meeting, however; US Building Permits and Housing Starts for the month of May as well as Import and Export prices data, also for the month of May, will be released at 1330BST. At the same time, the Canadian May CPI report will be released, which could result in some choppiness in the Loonie.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

US equity indices saw a very modest pullback from all-time highs levels during yesterday\u2019s session amid caution, profit-taking and general position adjustment ahead of this evenings key FOMC rate decision and major index futures continue to trade with a degree of caution in pre-market this morning; E-mini S&P 500 futures currently trade in the 4230s, […]<\/p>\n","protected":false},"author":3,"featured_media":10260,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[8,2],"tags":[42,69,28,67,279],"yoast_head":"\nMarkets in wait-and-see mode ahead of today\u2019s key Fed rate decision - Youtrading UK<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/youtrading.com\/en\/markets-in-wait-and-see-mode-ahead-of-todays-key-fed-rate-decision\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Markets in wait-and-see mode ahead of today\u2019s key Fed rate decision\" \/>\n<meta property=\"og:description\" content=\"US equity indices saw a very modest pullback from all-time highs levels during yesterday\u2019s session amid caution, profit-taking and general position adjustment ahead of this evenings key FOMC rate decision and major index futures continue to trade with a degree of caution in pre-market this morning; E-mini S&P 500 futures currently trade in the 4230s, […]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/youtrading.com\/en\/markets-in-wait-and-see-mode-ahead-of-todays-key-fed-rate-decision\/\" \/>\n<meta property=\"og:site_name\" content=\"Youtrading UK\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/YouTradingEnglish\/\" \/>\n<meta property=\"article:published_time\" content=\"2021-06-16T12:10:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-06-16T16:34:41+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/youtrading.com\/en\/wp-content\/uploads\/2021\/06\/GettyImages-522209078.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"509\" \/>\n\t<meta property=\"og:image:height\" content=\"290\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Joel Frank\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Joel Frank\" \/>\n\t<meta name=\"twitter:label2\" content=\"Estimated reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/youtrading.com\/en\/markets-in-wait-and-see-mode-ahead-of-todays-key-fed-rate-decision\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/youtrading.com\/en\/markets-in-wait-and-see-mode-ahead-of-todays-key-fed-rate-decision\/\"},\"author\":{\"name\":\"Joel Frank\",\"@id\":\"https:\/\/youtrading.com\/en\/#\/schema\/person\/ac77fbbe0e8ed23d3dce1372e3663b96\"},\"headline\":\"Markets in wait-and-see mode ahead of today\u2019s key Fed rate decision\",\"datePublished\":\"2021-06-16T12:10:00+00:00\",\"dateModified\":\"2021-06-16T16:34:41+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/youtrading.com\/en\/markets-in-wait-and-see-mode-ahead-of-todays-key-fed-rate-decision\/\"},\"wordCount\":1072,\"publisher\":{\"@id\":\"https:\/\/youtrading.com\/en\/#organization\"},\"keywords\":[\"Fed\",\"FOMC\",\"GOLD\",\"US Dollar\",\"USA500\"],\"articleSection\":[\"Economy\",\"Markets\"],\"inLanguage\":\"en-GB\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/youtrading.com\/en\/markets-in-wait-and-see-mode-ahead-of-todays-key-fed-rate-decision\/\",\"url\":\"https:\/\/youtrading.com\/en\/markets-in-wait-and-see-mode-ahead-of-todays-key-fed-rate-decision\/\",\"name\":\"Markets in wait-and-see mode ahead of today\u2019s key Fed rate decision - 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