FOMC Meeting 2 PM; Elections across the pond tomorrow
DECEMBER 11, 2019
The U.S. Dollar is trending in common ranges as markets stay relatively quiet in anticipation of the Federal Reserve policy announcement and press conference later at 2 PM.
While no changes to interest rates are expected, much will be asked of Jerome Powell as the year ends with uncertainties over trade and how to tackle a slowdown in the pace of economic growth.
The central bank has cut rates three times this year and maybe running out of room to add easing monetarily to the economy. Expect heavy questions regarding the Repo situation, an increase in Overnight lending rates that affected lines of credit and liquidity for banks, which forced the Fed to inject billions into the system. In the midst of all this, the buck remains quite resilient as other regions of the world struggle to have the job growth and sectors beyond manufacturing are contracting. We foresee a cautious Powell, committed to changing stance if needed later as a wait-and-see approach is taken.
What to Watch Today…
- FOMC Meeting & Press Conf. 2 PM
Complete Economic Calendar can be found here.
The Euro remains trading within a 50-point range swinging back and forth as traders await Thursday’s U.K. elections along with Christine Lagarde’s first meeting as head of the European Central Bank. Loaded Thursday will play a major role in providing guidance into 2020 as we believe Lagarde will need to sound more positive and look towards a more hawkish future to appease the concerns of Germany and northern nations tired of low-interest rates that have dipped into negative territory.
Additionally, a different administration in the U.K. could mean a return to the negotiating table with the EU. The officials and delegates of the EU Parliament in Brussels have a loaded plate trying to come to an agreement over the 7-year budget to extend to nations for projects while also setting up a €20.0-billion Common Budget to deal with imbalances between member nations. If they find common ground and unite as they did over Brexit, the Euro could see better fortunes next year.
The Pound hit the brakes but is set to see wild times in the next few days as the biggest risk event of the month and to close the year finally arrives. A win for Boris Johnson seems to be the more expected scenario and one that markets are more ready to price-in than any other.
Nevertheless, gridlock is still a major outcome possibility and even a win for the opposition could lead to further gains for Pound as the prospects of Brexit even happening would fade. The end to such a prolonged process will not be easy but promises from all sides seem to indicate that the U.K. wants to move forward fomenting a focus on domestic issues that caused the divisions in the last few years.