Today is a big news day: We get the Fed likely on hold

Barbara Rockefeller Rockefeller Treasury Services, Inc.

Outlook

Today is a big news day. We get the Fed likely on hold, if hawkish, the Bank of Canada likely hiking, the UK budget that will come under intense fire no matter what it contains, and earnings from Microsoft and Alphabet. Looming over it all is doubt about the tech sector/AI. Markets are weirdly calm in the face of all this.

Be careful what you expect. The Reserve Bank of New Zealand was expected to hike and didn’t. At least some of the traders in the CAD are geared up for the same possibility there. Note the NZD crashed on the news. The ECB meets tomorrow and the BoJ on Friday, both expected to stay on hold but hey, you never know.

Next week (Nov 3) it’s the Reserve Bank of Australia. Inflation is running at 4.3% y/y (Sept) and that has led to strong expectations of a hike.

Forecast

The market has known for a long time that the Fed is on hold at this meeting, so the negative effect on the dollar is fading fast. Two things: we don’t know what might get said that would influence expectations for the December meeting, and if a hike is still on, has it already been priced in or is there more to come? Given so many others planning a hike, does nothing much change in FX? Note that Friday’s nonfarm payrolls is irrelevant.

There is a less than 50% probability that the narrative shifts to no change in December, too. But we might have to read between lines to see it, since Fed chief Warsh is so adamant about no forward guidance.

It’s a little weird, but usually when the Fed delivers exactly as expected, the dollar fades a bit. It’s as though it needs a constant flow of support. This time it’s getting that support from the tech sector/AI outlooks. Gee, what can go wrong?

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Author

Barbara Rockefeller
Rockefeller Treasury Services, Inc.

Experience Before founding Rockefeller Treasury, Barbara worked at Citibank and other banks as a risk manager, new product developer (Cititrend), FX trader, advisor and loan officer. Miss Rockefeller is engaged to perform FX-relat

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