The Federal Reserve is Expected to Cut Interest Rates Today
Wednesday 30 October, 2019
Daily Currency UpdateUSD - United States DollarThe Federal Open Market Committee led by the Federal Reserve Chairman Jerome Powell is wildly expected to cut interest rates by a quarter-point today from the current 1.75% to 1.50%. This will be the central bank's third cut this year after rising in December of 2018. The greenback made gains yesterday against its global counterparts heading into decision day; participants would instead hold the world's reserve currency when a change in policy is expected. Equities in North America are holding strong and steady this morning as a cut will fan the preverbal flames of economic stimulus in the United States. The Fed should also signal that it will maintain the current 60 billion a month buyback of asset-backed securities, maintaining quantitative easing or as market participants are calling it QE-FE (Quantitative Easing ForEver).The rate announcement will come after the US 3rd quarter GDP is released, which is expected to signal a slowdown mainly due to investment in business and retail sales. The WTI Crude Oil price is mixed with US stockpiles expected to fall off from last week's print today. Gold was also falling earlier to a one week low but has since reversed course and is posting a 0.37% gain up to about $5.50 to $1493 a troy ounce.
Key MoversThe New York session was one of consolidation with the US Dollar Index flat, S&P down -0.08%, and the US 10 year Treasury closing at 1.8385% (after touching a monthly high at 1.8580%), ahead of today's important FOMC meeting. The implied probability of a 25-basis point cut sits at 94%, almost a certainty, but investors will be watching closely what Jerome Powell has to say on forward rate guidance and the divide among FOMC members. The Brexit headlines continued overnight with UK parliament voting overwhelmingly (438-20) to have a general election on December 12th. The bill will need to go to the House of Lords before getting its Royal Assent on Thursday. It's expected that there is to be minimal disruption in the Upper House. Interesting to note that many of the Ministers abstained, signaling reluctance amongst the vote. GBP/USD was relatively volatile overnight, touching lows of 1.2807 before spiking 0.77% to a high of 1.2905 as the Labour Party announced it would back the election. It is now sitting around 1.2865.
- EUR/USD: 1.1102 - 1.1127 ▼
- GBP/USD: 1.2858 - 1.2905 ▲
- AUD/USD: 0.6848 - 0.6875 ▼
- NZD/USD: 0.6342 - 0.6368 ▼