FOMC meeting gets underway today - BBH

Analysts at BBH point out that the FOMC meeting gets underway today with the outcome announced tomorrow and will be keenly ached by investors.  

Key Quotes

“Ahead of that, today the US reports August housing starts, which should recover a bit from July's unexpectedly large 4.8% decline.  The impact of the hurricanes will likely distort the time series starting in Q4.  The Fed's challenge of setting the appropriate monetary policy for the economy is all the more difficult if the economic data becomes distorted.”  

“Still, over the past week or so, the market has moved to recognize a somewhat greater chance of another Fed hike by the end of the year.  This effectively means the December meeting.  The CME's calculation puts the odds at 55.8%, interpolating from the Fed funds futures strip.  This is up from around 37.5% a month ago and 41.3% a week ago.  Bloomberg's calculation puts the odds at 49.1% up from 35.2% a week ago.”  

“The increase perceived likelihood has not done the dollar much good against the euro, where the single currency traded above $1.20 today for the first time since September 11.  The euro recorded the recent high on September 8 near $1.2090. The next key retracement target is near $1.2165, which is 50% of the single currency's drop from mid-2014.  The dollar's gains against the yen were extended toward JPY111.85.  The next level of resistance is seen near JPY112.00-JPY112.20.”  

“Besides August housing starts and building permits, the US reports Q2 current account and August import price data.  The Fed speaking embargo remains in place until this Friday due to the FOMC meeting on Wednesday.”