It’s Fed day and finally global investors will find out exactly by how much the Fed will cut rates and what their thoughts are for the remainder of 2019! It’s a big day for financial markets and, in particular, the mighty greenback. Since the Federal Reserve hinted at an interest rate cut, the trade-weighted US dollar index has gained over 1%! Is there a subtle message within that statistic? Possibly that the greenback will still be the best of a bad bunch despite the Fed potentially embarking on a cycle of interest rate reductions.
Whatever happens tonight, one thing is for sure – they’ll be a strong bout of volatility as market participants forge their bets on future Fed policy. The most likely outcome is for the Fed to lower rates by 25bps (0.25%) but there are cases for both a 50bps cut or no cut at all. This shows the divergence of opinion/expectation across markets. Away from their policy action and there will be significant emphasis on the voting pattern from FOMC members as well as the accompanying statement and various forecasts. In addition, Fed chair Powell will deliver an oral statement mixed with a Q&A session. All-in-all a huge amount of information for participants to digest. GBPUSD is already sitting at close to 30-month lows, support comes in between $1.20-$1.21, if this pocket goes then it’s hard to determine exactly where the next level comes in as we go back to the infamous October 4th 2016 flash-crash low which could be anywhere in the region of $1.14 – $1.18.
Also on the agenda for today – Eurozone inflation and gross domestic product numbers due for release at 10am. This will be followed by ADP private payrolls data from the US at 1315. In addition, a Canadian GDP report will follow at 1330. Tonight’s Fed announcement will be released at 1900 and will be followed by Powell’s statement and press conference at 1930.
Written by Viv Savani. 8:46am, July 31st 2019
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8:28am, August 2nd 2019
Bank of England stand pat, all eyes on US jobs report…