Macro economics

Analytics on 29/07/2020. Markets relatively calm ahead of FOMC

European stocks are trading in a mixed manner on Wednesday amid lack of progress on a fresh U.S. relief package, and ahead of the outcome of the Federal Reserve decision. After Republicans proposed a 1 trillion-dollar coronavirus aid bill at the start of the week, Democrats have criticized the package’s limitations. Furthermore, President Donald Trump on Tuesday voiced disagreement with some aspects of the bill.

Meanwhile, today was the second consecutive day that the U.S. reported more than 1,000 fatalities amid the ongoing pandemic. On the positive side, Pfizer and Moderna have begun phase three trials of their respective vaccine candidates. In individual stocks, German's Deutsche Bank posted a second-quarter loss despite a strong performance at its investment bank.

Against this backdrop, the UK’s FTSE 100 adds 0.31 percent to 6,148. Italy’s FTSE MIB edges lower by 0.74 percent to 19,755, France’s CAC 40 gains 0.65 percent to 4,960, while German DAX 30 declines by 0.10 percent to 12,822. U.S. stock index futures are trading marginally higher ahead of the opening bell.

Investors now shift focus to the Fed’s meeting outcome due later today. It is widely expected that the central bank will deliver a dovish message that could add to the selling pressure surrounding the greenback. If so, EURUSD could easily exceed the 1.18 barrier and climb to fresh two-year highs. Since the previous meeting, coronavirus cases rose, jobless claims resumed the rise, and many other economic indicators deteriorated. As such, the central bank could express a downbeat tone on the economic recovery and probably even hint at additional stimulus measures that could be taken in autumn.

In commodities, gold prices came under some negative pressure on Wednesday after yesterday’s rejection from fresh record highs. The bullion has settled around $1,950 ahead of the decision from FOMC. Dovish rhetoric from the central bank could act as a bullish catalyst for the precious metal as downbeat remarks will fuel investor worries about the pandemic and economic recovery. In this scenario, gold prices could climb back to the $1,980 area and even register fresh all-time highs if risk aversion is intense enough.

Nathan Lambert, Head of Global FX Analytical Department

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Interest rates

Country Rate Value
USA Federal Funds 0,25 %
Switzerland 3 Month LIBOR Range -0.75 %
United Kingdom Repo Rate 0,10 %
EU Refinancing Tender 0,00 %
Japan Overnight Call Rate -0,10 %
New Zealand Official Cash Rate 0,25 %
Australia Cash Rate 0,25 %
Canada Overnight Rate Target 0,25 %
All rates

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