Markets showcased unease as the FOMC‘s policy meeting loomed, causing Wall Street indices to retreat. The US housing market faced a sharper decline than predicted, while the currency domain narrated dynamic tales, particularly concerning the Dollar, AUD, and CAD. In Asia, the Yen’s stance ahead of BOJ’s meeting drew attention. Commodities like crude oil experienced flux, while cryptocurrencies like Bitcoin and Ethereum held firm ground.
Wall Street – September 20, 2023: A collective inhale was sensed across financial circles as markets showcased vulnerability in anticipation of the Federal Open Markets Committee (FOMC) two-day monetary policy meeting, leaving stakeholders edgy.
Major Indices Feel the Pressure
The cloud of uncertainty preceding the FOMC‘s scheduled announcement dampened the spirits on Wall Street. Major indices reeled, with The Dow Jones Industrial Average retracting by 0.7% to settle at 34,385.5 intraday. Following closely, the S&P 500 and the Nasdaq Composite both eroded 0.6%, marking positions at 4,427.1 and 13,633.3, respectively. The consensus seems to favor a status quo on key interest rates, given the 99% market probability hovering around the 5.25%-5.00% mark. Notably, the upcoming November meeting also suggests a 70.9% chance of no major shifts.
Economic Snapshots: Housing and Currency Dynamics
The U.S housing market witnessed a sharper decline than anticipated, with housing starts in August plummeting by 11% to an adjusted annual rate of 1.28 million units, diverging from the projected 1.44 million. Delving deeper, single-family starts decreased 4.3% to 941,000 units, while larger projects, those with at least five units, slumped a staggering 26%.
Currency markets also narrated a gripping tale. The Dollar Index marginally upshifted by 0.05% to 105.13, skirting the edges of its 6-month peak. Meanwhile, speculations around the European Central Bank’s strategy for excess liquidity nudged the Euro. News of the Reserve Bank of Australia hinting at future interest rate increments buoyed the AUD/USD, which appreciated by 0.31%. Canada’s inflating gasoline prices, boosting its annual inflation rate to 4.0% from July’s 3.3%, propelled the Canadian Dollar upwards.
Asian Markets and Commodities
Turning Eastward, the Japanese Yen remained close to its 10-month nadir against the Dollar. The Bank of Japan, slated for its policy discussion on Friday, is anticipated to uphold its ultra-low interest rate policy, though Governor Kazuo Ueda’s comments have sprinkled the air with speculation of a policy shift.
The GBP/USD, on the brink of a Bank of England interest rate decision, exhibited a modest ascent of 0.08%, settling around 1.2395.
In the commodities arena, crude oil prices wavered with Brent crude futures settling at $94.34 a barrel after touching a 10-month zenith. Concurrently, COMEX Gold for December delivery edged up to $1,953.70/oz as the Dollar eased.
In the decentralized currency domain, Bitcoin’s bullish surge was momentarily halted, but it managed to stay above the $27,000 benchmark, last trading at $27,224. Ethereum too displayed resilience, touching a three-week pinnacle just under $1,670, and later receding to $1,640.
The financial world’s eyes are firmly on the Federal Reserve, with many awaiting the Summary Economic Projections, including the famed dot plot, to gauge future trajectories. Any deviation from the market’s expectation of an extended pause on rate hikes would be seen as a decidedly hawkish move, making the upcoming hours crucial for traders and investors alike.
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