FOMC MINUTES TO SET THE TONE ON WEDNESDAY
Monetary policy will likely dictate the financial markets on Wednesday, as the Federal Reserve gets set to unveil the minutes of last month’s policy meeting.
There’s not a lot of action expected leading up to the Fed minutes. In Europe, Spain will release final September inflation data at 07:00 GMT. The harmonized index of consumer prices (HICP) is forecast to rise 1.9% annually in September.
Federal Reserve Bank of Chicago President Charles Evans is scheduled to deliver a speech at 11:15 GMT, about an hour before US markets officially open.
Investors will then turn their attention to the Federal Open Market Committee (FOMC) minutes, which are due for release at 18:00 GMT. The US central bank kept interest rates on hold last month, but chose October as the start of the “great unwind.” The Fed will begin reducing its balance sheet this month at a rate of $10 billion. At that rate, it’ll take years just to see the balance sheet cut in half from the current level of around $4.5 trillion.
The FOMC has just two meetings left this year. Investors are pricing one more interest rate increase before the end of 2017.
Shortly after the FOMC minutes, European Central Bank (ECB) board member Peter Praet is set to deliver a speech.
Commodity traders will also be monitoring weekly crude inventory data courtesy of the American Petroleum Institute (API). The official inventory report from the US Energy Information Administration (EIA) will be released Thursday morning, which is one day later than its usual release schedule.
The euro gained ground on Tuesday, returning above 1.18 US amid geopolitical crisis in Catalonia. The EUR/USD exchange rate nudged higher in overnight trade to reach 1.1830. All eyes will be on the ECB in the coming months as policymakers attempt to pour cold water on the euro rally. The ECB is expected to announce the fate of its quantitative easing program this month.
The pound rose on Wednesday, and is on track for its third consecutive daily advance. Cable pushed through the 1.32 level as the dollar bulls lost control of the market. Sterling is consolidating gains north of 1.32, with prices eyeing the 20-day simple moving average at 1.3260. On the opposite side of the ledger, immediate support is likely found in the 1.3150 region.
Crude oil broke out on Tuesday, posting its biggest one-day gain in two weeks on signs that the global market is returning to balance. US crude prices extended their rally north of $51.00 a barrel on Wednesday before paring gains through the Asian session. Prices continue to hold the $51.00 level ahead of key inventory data.