FX Update

October 28, 2015 by

Markets will be expecting a clear signal from the FOMC meeting later today regarding when a rate hike will be possible. Traders are putting a punt on a possible USD short as we could see the market is getting priced in already. Many analysts assume the FED is not going to hike until 2016 and some are even anticipating for quantitative easing.

European central bank already indicated possibility of more monetary stimulus if the economic condition of the Eurozone economy does not improve, most importantly the inflation rate. The Rikisbank this morning follow the same pathway as ECB by expanding their on-going stimulus programme by 65 billion Kronor, Swedish Kronor slide to the downside on the back of this monetary decision. Also, in Australia, inflation figure was released overnight and the figure was below expectation, market was expecting inflation rate of 1.7% but it dropped to 1.5%. Norwegian unemployment rate has also increased to 4.6% from 4.3%. This was indicated in the unemployment figures released earlier today. As a result of the economic data, Australian dollar, Swedish Kronor and Norwegian Nok prices has dropped massively.

Oil is another instrument to watch today as we expect the crude inventories figure from the US. oil prices has been sliding for 7 consecutive trading sessions but yesterday, prices dropped on the 61.8% Fibonacci level at $42.74 and the level is still holding as a strong support which has pushed prices up, above $43.50. when stock inventories data comes out later in the today, an increase in the stock pile might have a negative impact on oil price which might push prices back below $42.72  but if we see a shortage in oil stock inventory, prices will rally to test the next level at $44.35.

However, FOMC meeting today will be the most important event for today. A clear indication of when interest rate will rise will see a bullish USD and commodity prices will drop and vice versa. Royal Bank of New Zealand will also be meeting later tonight, market is not expecting a change ion interest rate decision from New Zealand but they are most likely to talk the kiwi down.