This afternoon the Fed will make its latest decision regarding interest rates and economic policy. Most investors expect the Fed to leave interest rates unchanged at near 0%. The debate is whether the Fed will maintain its loose monetary policy or if it will announce the end to its stimulus program. The Fed may announce it is ending its mortgage buyback program at the risk of destabilizing the markets or it may decide to extend the program beyond its October ending date.
U.S. Equity markets are called slightly better this morning. Although the overnight range was tight, traders provided a constant bid as they try to position themselves ahead of this afternoon’s Fed FOMC announcement. The December E-mini S&P 500 chart indicates that 1051.50 has to hold as support. A break through this level will turn the main trend down on the daily chart.
Treasury futures are called flat to lower. The recent weakness in the Dollar has been supportive for December Treasury Bonds and Notes. This is an unusual reaction since higher equity markets usually indicates weaker fixed income instruments. Traders will be watching the Fed to see if it maintains its loose monetary policy until at least the end of the year.
The U.S. Dollar is trading mixed against the major currencies this morning. There is some give back taking place in the December Euro and December Canadian Dollar because of lower demand for higher risk assets. Position evening is also providing some downside pressure to the December Japanese Yen. The December British Pound is trading better following the release of the minutes from the last Bank of England meeting. Traders are supporting the Pound because the report did not mention the reduction of interest rates for deposits from member banks.
December Gold and Silver are trading mixed this morning. The lack of direction in the Dollar is helping to contribute to the sideways trade. The direction of the U.S. Dollar is expected to wield the biggest influence on the precious metals. A sell-off in the Dollar after the Fed report should send gold soaring.
December Crude Oil is trading lower overnight. The weaker Dollar and less demand for higher risk commodities are helping to contribute to the weakness. Today’s supply and demand report should move the market early in the trading session but the move will be limited because of this afternoon’s FOMC announcement.
Grains and Softs markets are trading lower as traders take profits after yesterday’s strong surge to the upside. Traders are waiting for direction from the Dollar before committing themselves. A stronger Dollar will reduce demand and trigger a sell-off. A weaker Dollar should fuel further strength on expectations of greater demand over the long-run.
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