Investors have a week of central bank events looming with meetings of the U.S. Federal Reserve and the Bank of England likely to move markets around the globe. Asian markets gain some ground Monday morning after a tough week for global stocks. In Tokyo Nikkei225 index end the trading session 0.6% higher while Hong Kong’s Hang Seng stock index was up 0.1%, Australia’s S&P ASX 200 finished 0.9% higher.
European stocks started the week mixed with tiny gains in London, DAX trading 0.18% lower and CAC40 gives up 0.49%.
According to analysts at Danske Bank, majors will be awaiting the key Fed decision this Wednesday as the market has priced the Fed notably more dovishly recently, which suggests that risks are tilted towards a hawkish surprise. “There is a key risk that the FOMC could lower rate expectations (aka the dots) further out. For USD, it will thus be key whether Fed Chair Jerome Powell and co come across as (a) adamant to get to neutral or (b) cautious in not making policy contractionary. The former is our base case, which should be USD supportive near term.”
The Federal Open Market Committee is expected to raise its short-term interest by a quarter-point to a range of 2.25% to 2.5% after a meeting on Wednesday. This would be its ninth hike since late 2015.
EURUSD is trading higher around 1.1340, as risk appetite improves across Europe, and the USD correction across the board regains momentum. The pair facing strong resistance USD hit 19-month highs versus its main competitors at 97.71 on Friday, after Chinese economy slowdown fears intensified following weaker Chinese macro data. In Italian budget crisis, ANSA reported that the Italian coalition leaders have reached an agreement over the budget accord.
USDJPY traded to a high of 113.674 overnight which is basically where immediate resistance for today lies (113.60-70). Currently is hovering around 113.30 awaiting FED’s decision. The next resistance level is at 114.00. Immediate support can be found at 113.20 (overnight lows). The next support level lies at 112.70. Net speculative JPY shorts increased to a total of JPY 109,100 from JPY 104,800 bets. These are the largest net total of shorts since March this year.
GBPUSD is gaining bullish momentum as in early trading managed to break above the 50h moving average at 1.2591 and now is challenging the 100h moving average at 1.2614. A strong resistance is previous week top at 1.2660 where also the 200h moving average waits. The economic calendar is light today, leaving room for Brexit speculation to have its say. The chances of a second referendum are rising, but PM Theresa May rejects these calls.
Oil prices in quite trading after slipping by around 2% the previous week, but remained under pressure from oversupply and concern over the prospects for global economic growth and fuel demand. Saudi Arabia, the world’s biggest oil exporter, will release its budget for next year. It needs prices to climb beyond $80 a barrel to balance it, according to Fitch Ratings.