Fed rate decision in focus today

Daily Analysis - 08/11/2018

The greenback traded in a narrow range, Investors wait FED Decision

On Thursday the popular USD exchanged in a tight range. That gave traders the free time they needed to concentrate on the Federal Reserve's policy decision later today. Now the central bank's Federal Open Market Committee (FOMC) is suspected to keep the hawkish style we witnessed in recent policy announcements while retaining interest rates fixed this time.

The Fed has increased rates 3 times this year while the U.S. economy expanded and inflation started to build up. The Fed has indicated a rate increase in December, with two more hikes in 2019. Sim Moh Siong, currency strategist at Bank of Singapore said. "The dollar is likely to benefit as we still expect the Fed to maintain its hawkish stance. The U.S. economy needs rising rates as wage pressures are building and there is a risk of overheating the economy."

Dow and S&P 500 rose after the elections

Yesterday's post-midterms increase was bigger than the average increase that most of the times occurs. Goldman Sachs recorded that the S&P 500 has an average profit of about 0.7% between the day before the elections and the day following midterms. Yesterday the day scored the biggest post-midterms increase for both the S&P 500 and Dow since 1982, when the indexes surged 3.9% and 4.3%, respectively. Trump said in a news conference "Hopefully we can all work together next year to continue delivering for the American people, including economic growth, infrastructure, trade, lowering the cost of prescription drugs,” "The Democrats will come to us with a plan for infrastructure, a plan for health care, a plan for whatever they're looking at and we'll negotiate."

Oil remains plentiful despite U.S. sanctions on Iran

U.S. West Texas Intermediate crude futures were at $61.68 per barrel, practically even from their last close. Brent crude oil futures was at about $71.90 per barrel dropping 14 cents from their last conclusion.

On Thursday Oil prices dipped while record U.S. crude production increased fears of a comeback of global oversupply, discussion inside OPEC.

Benjamin Lu of brokerage Phillip Futures said that overall, "Oil prices continue to demonstrate...bearish influences amidst market concerns of rising global inventories... (and as) increasing output levels threaten to upset supply fundamentals in Q4 2018."

European markets open and major currencies still in range

Today there is not much movement with major currencies, essentially maintaining their focus to the FOMC meeting to come. Many believe that the Fed report will probably be balanced but markets are working along expecting potential adjustments to the statement.

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