Four major market movers capture investors’ interest on Wednesday – FOMC statement, ADP’s pre-NFP report, UK PMI, and crude oil inventories, which impact USD trading not only for the day but also in the longer term.
Westpac analysts believe that FOMC’s meeting in November has little potential to stir any major changes. Even more so as Fed Chair Janet Yellen and the Committee have clearly expressed their intention to slowly but surely tighten the policy, with the next major move planned before the end of the year, most likely at the next FOMC meeting scheduled in December. The market though was responsive, fully pricing in a December rate hike. The November meeting will therefore confirm an expected and imminent move.
President Trump’s decision regarding the new FOMC Chair is of course closely eyed by market participants and eagerly awaited by the end of the week. If we are to believe the market rumours, then Jerome Powell comes up first with his strong opponent John Taylor. Both are perceived as rather hawkish compared to Yellen seen as more dovish. Therefore, the announcement of the new FOMC Chair is likely to shift the general market sentiment and expectations for 2018.
With an eye to the upcoming FOMC meeting, EURUSD bounces backward today, revolving around 1.16453.
EURUSD traders have sensed a slight recovery in the pair, attempting moves towards 1.17 as markets can almost echo the European opening bells, with a broad-based recovery in the USD fumbling in the 94.60 area.
Fresh USD sell-off across its key competitors despite Treasury yields’ strengthening also contributes to a rebound seen in the EURUSD pair. The US dollar index moves back to 94.50.
However, further recovery in the pair seems to be limited for the day, as there is significant potential for the markets to react to a hawkish Fed statement.
UK PMI Report
In the UK, the manufacturing PMI is not likely to change, remaining in the area of 55.9 in October, according to TDS analysts. Despite the considerable decline that shook things up on the UK market, domestic and export orders and employment ‘are still holding up well’ TDS experts say.
ADP Pre-NFP Report
The private employment sector (non-farm) in the US added 135k jobs from August to September, on an occasionally adjusted basis. The ADP report for October is due to be released today at 8:15 am ET. USD will be moved further by this release.
Crude Oil Inventories
Crude oil prices continue to be on the rise, bolstered by signs of improving compliance with the OPEC’s output cut deal.
The WTI crude December contract was 42 cents higher or 0.77% ($54.80 a barrel) at 03:45 am ET (07:45 GMT), hitting its highest level since January.
OPEC’s October output dropped by 80,000 bpd to 32.78 million bpd, thus supporting crude oil prices upward move, adhering to its pledged supply curb at 92% vs. 86% in September.
In the UK, Brent oil for January delivery on ICE Futures Exchange gained 31 cents or 0.55%, moving up at a 2-year high and hitting $61.25 a barrel.
Russia stepped up saying it reduced its output by nearly 300,000 bpd last month, below 11.247 million bpd October 2016 levels.
Meanwhile, crude oil investors are keeping a weather eye on the official US stockpiles data soon to be released by the US Energy Information Administration.
The American Petroleum Institute said on Tuesday that oil supplies dropped by 5.087 million barrels during the week ending 27 October in comparison to the expected decline of 2.100 million barrels.