Tonight's FOMC - what to look out for
The FOMC meeting tonight will be the last meeting (and announcement) without a press conference, so all eyes will be scrutinising the statement for any clues on the rate path ahead - largely beyond the December meeting. Next month, the Fed is widely expected to raise rates by 25bps for the fourth and final time this year, so it goes without saying, that anything suggests this is in doubt, would be significantly USD negative.
This may take a little 'reading between the lines' as the Fed will not want to cause any major panic in the markets. This is something we have not seen for years and is part of the function of forward guidance.
The statement is likely to continue noting a healthy economy, backed up by a strong labour market as we saw in the last report for Oct. Business investment has softened, however - evidenced in the ISM reports either side of the weekend - due to global trade tensions as well as tighter financial conditions. If the Fed were to mention tighter financial conditions, we could get a scare on either the USD, yields or stocks, so this could be a potentially market-moving addition (to the statement).
So far today, we have seen modest USD buying as traders expect the FOMC statement to stick to the script, and it is not surprising to see EUR/USD hit down towards 1.1400 again after rejecting 1.1500 yesterday.
USD/JPY is also pushing for a move towards 114.00, though with limited progress. Stock markets have also turned bearish this morning with the S&P futures now in the red and while the European indices with the exception of the UK's FTSE and Spain's Ibex having given up gains on the day.
As a result, the USD index is pushing higher, yet remains inside traded limits, so for now, we will put this down to intraday range trading ahead of tonight's risk event.