Macro economics

Analytics on 19/06/2019. Muted trading ahead of FOMC decision

European markets are trading in a muted and neutral manner, with some indices retreat marginally after yesterday’s rally and the best performance in five months in response to ECB chief Mario Draghi’s signal of a potential return to bond-buying and lower interest rates. Also on the positive side were hints from Trump. The US President wrote on Twitter about plans for an "extended" meeting with Chinese leader Xi Jinping at the Group of 20 summit in Japan next week. However, after a rally on Wall Street and in Asia, European stocks see a fading bullish momentum as trading activity is getting more muted ahead of the FOMC meeting results.

Against this backdrop, the UK’s FTSE 100 sheds 0.32 per cent to 7419, Italy’s FTSE MIB adds 0.20 per cent to 21,175, France’s CAC 40 rises by 0.10 percent to 5,515, while German DAX 30 gains just 0.09 per cent to 12,343. US stock index futures are little changed as investors wait for the Federal Reserve’s decision on monetary policy.

The dollar is on the defensive on Wednesday as traders are getting more cautious ahead of Fed’s verdict. This meeting is especially important for investors in the light of recent dovish signals from the central bank and some weak economic data. EURUSD lost ground yesterday after the unexpectedly soft Draghi’s statements. But the pair managed to attract demand around 1.1180 and got back above the 1.12 handle though fails to extend the recovery and remains close to the psychological level. Further dynamics will depend on the outcome of the FOMC meeting. Should the central bank’s tone come not as dovish as expected, the greenback will receive a widespread boost. If so, EURUSD will easily slip below 1.12 and could refresh lows below 1.1180.

Brent crude tried to extend yesterday’s recovery during the early trading in Asia but faced offers once again and turned negative on the day. The prices have settled around the $61 figure and may lose the important level as risk sentiment deteriorates gradually. The positive momentum in the market remains unsustainable and weak due to lingering concerns over rising supplies and cooling demand. However, the downside pressure could also be limited now as investors renew hopes for a progress in the US-China trade relations after the latest Trump’s tweets.

Gold prices in a retreat mode on Wednesday after a rally yesterday. The precious metal was rejected from the levels just below $1,355 and now tries to hold above the $1,340 figure, which is the intermediate support on the way to $1,325 and $1,320. Further direction in the bullion will depend on the outcome of the Fed meeting which will set the tone to the greenback. Should the US currency face a more aggressive selling pressure, the yellow metal could trim losses and get back above $1,350.

Nathan Lambert, Head of Global FX Analytical Department

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Interest rates

Country Rate Value
USA Federal Funds 2,00 %
Switzerland 3 Month LIBOR Range -0,73 %
United Kingdom Repo Rate 0,75 %
EU Refinancing Tender 0,00 %
Japan Overnight Call Rate -0,10 %
New Zealand Official Cash Rate 1,5 %
Australia Cash Rate 0,75 %
Canada Overnight Rate Target 1,75 %
All rates

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