The results of the U.S. FOMC meeting will be announced tomorrow, and a rate cut not seen in four years is expected. Market focus is on whether the cut will be 50 basis points or 25 basis points. According to the CME FedWatch tool, the odds are currently 67% for a 50bp cut and 33% for a 25bp cut, indicating a preference for the larger cut. However, the overall market remains unstable.
Today, the U.S. Retail Sales for August will be released at 9:30 PM Japan time. The market forecast is for a month-on-month decrease of -0.2%, while excluding automobiles, an increase of +0.2% is expected. The results of the retail sales data could trigger sensitive reactions in the dollar, but it is unlikely to significantly impact the FOMC’s decision on the rate cut size.
Market Outlook:
- With expectations of a 50bp rate cut growing, selling pressure on the dollar continues, but we are in a phase where adjustments are likely ahead of the FOMC announcement.
- If the retail sales results deviate significantly from expectations, there could be a market reversal, so caution is warranted.
Key Economic Indicators:
- U.S. Retail Sales (August): Expected -0.2% month-on-month
- U.S. Industrial Production (August): Expected +0.2% month-on-month
- Germany’s ZEW Economic Sentiment Index (September) and Canada’s CPI (August), among others
Strategy:
Currently, with the market pricing in a 50bp cut and increasing USD selling pressure, I am looking to take short positions in GOLD (XAU/USD) in anticipation of a temporary adjustment before the FOMC announcement.
