Likely Dovish FOMC Today
STOCK INDEX FUTURES
U.S. stock index futures are sharply higher and are up for the fourth consecutive day despite uncertainties surrounding the inconclusive outcome to the U.S. presidential election.
Jobless claims in the week ended October 31 were 751,000 when 745,000 were expected.
Major central banks around the world are under pressure to add more accommodation.
Once the political uncertainties in the U.S. are reduced, it will be the globally low interest rate environment that will once again dominate.
The U.S. dollar losses deepened and are on course for its biggest three-day drop since the market selloff in March, as traders await the outcome of a U.S. central bank policy meeting today that might hint at more stimulus.
The greenback has been weakening since May amid rising debt levels coupled with expectations for an extended period of low interest rates.
The euro currency is sharply higher despite news that euro zone retail sales fell 2.0% in September from August and was a larger drop than economists had anticipated.
The euro is higher in spite of the ongoing belief that the European Central Bank will deliver more stimulus when it meets in December, after ECB President Christine Lagarde last week said the fourth quarter GDP is almost certain to be weak.
The Bank of England announced another round of bond purchases at its policy meeting today.
The BoE’s Monetary Policy Committee agreed to another GBP150 billion of U.K. government bond purchases, equivalent to $195 billion. It takes the overall amount of the BoE’s portfolio of government and corporate assets to GBP895 billion. Officials voted to keep the central bank’s benchmark interest rate unchanged at 0.1%.
INTEREST RATE MARKET FUTURES
There is a growing perception that the U.S. Federal Reserve may have to do more to support the economy, as the close U.S. election makes a large stimulus package less likely.
The Federal Open Market Committee will conclude its two-day policy meeting today. A statement will be released at 1:00 p.m. central time and Federal Reserve Chairman Powell will hold a press conference at 1:30 p.m.
The FOMC will likely maintain its fed funds target range at zero to 25 basis points. The Fed left the target range for its federal funds rate unchanged at zero to 25 basis points on September 16 and signaled it would hold them there through at least 2023.
Federal Reserve Chair Powell in his press conference will likely acknowledge the impact of the uncertainties surrounding the inconclusive outcome to the U.S. presidential election and deliver a dovish on balance statement.
In addition, Powell may hint that the U.S. Federal Reserve may have to do more to support the economy.
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