The big day has finally arrived, tonight sees the FED releasing its decision on the Federal funds rate, it is expected to increase the rate to 0.5% from 0.25%, in its first rate hike in a decade. Traders will be waiting for this data with bated breath as the true effect of such a move is purely speculative. In theory an increase will lead to USD strength across the board, with commodities and indices dropping in price. If rates are not increased we would expect the USD to continue its recent losses and the prices of commodities and indices to rally. However, the question will be, how much of the rate hike or lack there of, is already priced in and how will markets look once all factors have been accounted for. In addition to the actual figure, markets will also be looking to the FOMC statement and economic projections for further guidance, a more hawkish tone will serve dollar bulls well, where as a dovish stance is expected to subdue bulls as bears take their que. Traders wont need to wait for the FOMC to enjoy some volatility, with data out of several major economies and the US Building Permits and Housing starts (expected at 1.16M and 1.14M respectively) , to keep them on their toes.
Plenty of data out of EU today, starting with the French, German and overall Euro zone Flash Manufacturing PMI expected at 50.6, 52.7 and 52.8. We also have the Euro Zone Final CPI y/y figures expected at 0.1%. Better than expect numbers will see the EUR gain some ground after yesterdays sell off. Worse than expected data will see bulls abandon ship as they start to feel the post ECB rally has been overextended.
GBP bulls will be looking to todays Average Earnings Index and Claimant Counts, expected at 2.5% and 0.9k respectively as a sign that all is well in the British economy and that the recent BOE dovishness is unfounded. Better than expected numbers will see the GBP strengthen across the board, while worse than expect numbers will see the pound take a tumble as the hopeful bulls close out there positions in anticipation of the FED decision due later in the day.
Kiwi traders will be on the look out for the GDP q/q figure, which previously printed at 0.4%, a better than previous number will fill bulls with confidence as the recent RBNZ hawkish tone establishes itself. A worse than expect number will see the NZD weaken across the board.