All is quiet on the western front as markets wait for this afternoon’s Federal Reserve policy decision. Markets overnight were all higher as investors around the world expect American policymakers to hold off on higher rates and kick the can down the road. In the foreign exchange market, the big dollar is a touch weaker this morning after experiencing a bounce on Wednesday, as North American equities are poised to open higher.
Very limited economic data in Asia overnight, with the New Zealand dollar being the biggest mover as Q2 GDP data disappointed. As indicated above, shares were mostly higher, with China’s Shanghai index being the sole bruise, falling 2% late in the session. The Japanese yen slid about 1% versus the dollar following export data that slowed for a second straight month. As another sign that China’s economic slowdown could be damaging the world’s third largest economy, the overnight data places more pressure on the Fed this afternoon. The European session was a bit more lively despite limited trade. The Swiss National Bank kept rates firm at -0.75% and signaled the recent depreciation of their currency will not limit their inclination to intervene in foreign currency markets. For the SNB, the ECB should be viewed as the biggest uncertainty, with some expecting a decision to expand accommodative policies into 2017 and further weakening the euro. Sterling a bit higher on the news retail sales expanded at an annual rate of 3.5%, which was actually below expectations. The British Pound has had one of the better weeks, moving higher against the euro and the dollar, and finding support from some earlier comments out of voting BOE members. As the European session winds down, we can expect volatility to become restricted and participation to be limited as the market awaits the big 2pm announcement.
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