Today sees the release of the Federal Funds Rate, expected unchanged at <0.5% and the much anticipated FOMC Statement, in which the Central bank of America will have summed up its view on the current and future health of the US economy, particularly regarding growth, inflation and employment. Todays Durable goods and Home Sales data will be the prelude to the FED releases as markets will be watching these figures for clues as to the health of the US economy and subsequently try to predict the FEDs stance as the new data is released.
Markets have currently priced in a 20% probability of a rate hike in September and a 50% probability of a rate hike in December, any change in today’s language from the Fed will result in fluctuations in markets. Should the FED be more hawkish and give markets cause to believe that the probabilities of a rate hike in SEP or DEC are more likely, we would see the USD strengthen across the board while equities take a tumble. However, should the FEDs language be more dovish in which the probability of an increase in rates is revised downwards, we would see the USD tumble as US stocks rally as cheaper money for longer devalues the USD.
The UK release of the Prelim GDP will also be on the watch list as markets still try to weigh up the effects of the Brexit vote, better than expected data will see the GBP firm up against its rivals while a worse than expected number may be enough to send the GBP spiralling as bulls lose confidence.
Crude oil has been suffering of late with prices tumbling from earlier highs of 50 USd pb to 43 USd per barrel as demand concerns heat up. Today’s inventory data will show us by just how much demand has fallen, with a less than expected drawdown, likely to see crude tank further. However, a larger drawdown will see bulls regain confidence as they regain some of the ground they have lost in recent trade.
Today’s key economic releases are as follows:
- M3 Money Supply y/y expected at 5%
- Prelim GDP q/q expected at 0.5%
- Core Durable Goods Orders m/m expected at 0.3%
- Durable Goods Orders m/m expected at -1.1%
- Pending Home Sales expected at 1.9%
- FOMC Statement
- Federal Funds Rate expected unchanged at <0.5%
- US Crude Oil Inventories expected at -2.1M