Following yesterday’s FOMC meeting, the USD has been bought. While the policy interest rate remained unchanged, the interest rate forecasts of FOMC members indicated one more rate hike by the end of the year, and expectations for higher interest rates next year also shifted upwards. Chairman Jerome Powell’s press conference also reflected a hawkish stance. This has curbed expectations of an early rate cut, and the market dynamics have changed.
The USD/JPY pair had fallen to the mid-147 yen level but has once again surpassed 148 yen. EUR/USD has dropped from the 1.07 range to the 1.06 range, and GBP/USD has fallen from the 1.24 range to the 1.23 range. Stock markets have seen selling pressure, and risk-averse yen buying has been observed. While USD/JPY is holding firm, the yen is exerting downward pressure on other yen crosses.
In this context, the Bank of England (BOE) Monetary Policy Committee (MPC) is set to announce its decision today. Economist forecasts are tilted towards a 25 basis point rate hike. However, after the UK Consumer Price Index came in below expectations the day before, short-term money markets are now evenly split between a rate hike and keeping rates steady. This meeting does not include quarterly inflation forecasts or a press conference by Governor Bailey. The focus is likely to be on any voting discrepancies among MPC members. In the previous meeting on August 2, two members (Haskel and Mann) advocated for a 50 basis point rate hike, one member (Dingra) voted to keep rates steady, and six members supported a 25 basis point rate hike.
In the international markets to follow, several central banks, including the Swiss National Bank and the Central Bank of Turkey, are expected to announce interest rate decisions. Additionally, central banks of the Philippines, Taiwan, Indonesia, Sweden, Norway, and South Africa are scheduled to announce policy rate decisions.
Besides the policy rate announcements, there will be a concentration of US economic indicators, including the US Current Account Balance (2nd quarter of 2023), US Initial Jobless Claims (09/10 – 09/16), Philadelphia Fed Manufacturing Index (September), US Existing Home Sales (August), and US Leading Economic Index (August). Additionally, the Eurozone Consumer Confidence Index (preliminary) for September will be released.
In terms of speaking events, the minutes following the Bank of England policy rate announcement will be of interest, and ECB Executive Board Member Schnabel will participate in an economic-related conference. There will also be an auction of $150 billion worth of US 10-year Treasury Inflation-Protected Securities (TIPS).
Today’s focus is on the Bank of England’s policy rate announcement. Given the Swiss National Bank’s decision to keep rates unchanged and the substantial selling that followed, it’s being viewed with a selling bias.