Fed FOMC watch

Wall Street broadly oscillated near neutral on Tuesday following the fresh record high printed for the S&P 500 index with the focus evidently set ahead to the key event risk this week in the form of the Federal Open Market Committee (FOMC) meeting. Having held the expectation for a 25-basis point cut to come along after the successive disappointments seen in various soft indicators in the past weeks, this view had largely been priced in. What would matter in the upcoming October meeting where we will be missing projections would be the forward guidance from the Fed. To some extent, the market can be seen holding the view that the Fed could go about with a hawkish cut, taking a pause from their midcycle adjustment after successive cuts since July. It will be a fine balance for Fed chair Jerome Powell to manage through his press conference following the meeting statement release and any perception of a tilt to either sides may be one to drive the greenback moves.

Ahead of the Fed updates streaming in from Thursday, 2:00am (Singapore time), the US dollar index, measured against six major currencies, can certainly be seen paring some gains in anticipation of the rate cut. Compared to the Japanese yen, the greenback had instead held largely steady around $108.90 levels, little moved after testing the $109 handle yesterday. The currency pair will also be awaiting the Bank of Japan meeting that is now viewed with less likelihood of a move given diminished pressure from the currency end. As detailed in our BoJ preview, the currency pair at the very least is still expected to remain supported going into the meeting review.

Source: IG Charts

Asia open

Asia markets can be seen going into the Tuesday session with a mixed tone, waiting with bated breath for the Fed release amid the lack of releases in the Asia session. Notably, this morning had seen Australia’s Q3 inflation numbers arriving in line with the market consensus. Coming in at 0.5% quarter-on-quarter, the figure runs along trend and can be seen invoking little reaction for AUD/USD which remains oscillating $0.6860 levels.

Look to the US session for the series of releases including the advance reading of US Q3 GDP and the Fed conclusion. On the earnings calendar, Apple Inc (All Sessions) and Meta Platforms Inc (All Sessions) are also lined up for after the market close which would have an influence upon Asia markets going into Thursday.

Yesterday: S&P 500 -0.08%; DJIA -0.07%; DAX -0.02%; FTSE -0.34%