US stocks ended the day higher as traders waited for the Fed decision, which is expected tomorrow. The Dow, S&P 500, and Nasdaq gained by 65, 10 and 25 points respectively. The Fed is expected to leave interest rates unchanged at its meeting, which begins today. It is also expected to reiterate its earlier statement that it will be patient on further rates. This is because of the overall slowdown in the US and global economy and the low rate of inflation. In Asia, stocks dropped ahead of that decision, with Nikkei, Hang Seng, and Shanghai declined by 0.26%, 0.25%, and 0.23% respectively.
The Australian dollar rose slightly against the USD after RBA released its minutes for the meeting held earlier this month. In the meeting, the bank left interest rates unchanged and continued to worry about the slowing global economy and the risks in the housing sector. The country’s real estate prices have been declining in major cities like Sydney and Melbourne. This has affected the home owners, investors, and banks. In fact, data released today showed that the real house prices had declined by 2.4% in the fourth quarter. This was the biggest decline in more than ten years. The statement said:
Taking account of the available information on current economic and financial conditions and how they were expected to evolve, members assessed that the current stance of monetary policy was supporting jobs growth and a gradual lift in inflation. However, members noted that significant uncertainties around the forecasts remained, with scenarios where an increase in the cash rate would be appropriate at some point and other scenarios where a decrease in the cash rate would be appropriate. The probabilities around these scenarios were more evenly balanced than they had been over the preceding year.
The sterling strengthened in the Asian session as complexities surrounding Brexit continued. This is after the parliament’s speaker ruled out another vote on Brexit unless there were significant changes in its wording. This was a blow to Theresa May, who was hoping to table the vote yesterday. Still, the speaker’s decision makes sense because the deal May was to present had already been rejected by the same parliament. In addition, members would not have an incentive to vote for it because they have already voted on extending the exit period if there is no deal.
On economic data, traders will receive the employment numbers from the UK. The unemployment rate is expected to remain at 4.0% while the average wage is expected to rise by 3.2%. This will be lower than the previous 3.4%. The claimant count change is expected to rise by 13.1K, which is lower than the previous 14.2K. In Germany, traders will receive the ZEW economic sentiment, which is expected to decline by -11.0.
EUR/USD
The EUR/USD pair rose during the Asian session as traders waited for the statement from the Fed tomorrow. The pair is trading at 1.1346, which is slightly lower than yesterday’s high of 1.1360. On the hourly chart, the current price is close to the upper line of the Bollinger Bands. The pair is also trading in an upward channel as shown below. There is a likelihood that the pair will continue to move up, with the next target being the yesterday’s high of 1.1360.
GBP/USD
The GBP/USD rose after the speaker rejected Theresa May’s decision to table the Brexit vote again. The pair is now trading at the 1.3277 level, which is much higher than yesterday’s low of 1.3182. This level is between the 100% and 61.8% Fibonacci Retracement level. It is also above the upper line of the Envelopes indicator. The pair could continue moving up, but this will depend on the developments on Brexit. The important level to watch today will be 1.3300.
AUD/USD
The Australian dollar rose slightly against the USD after the RBA released its minutes. The AUD/USD pair is trading at 0.7104, which is along the 50% Fibonacci Retracement level. It is also slightly above the 21-day and 42-day moving average. The RSI has remained relatively unchanged at the 50 level. The pair could consolidate within these levels until tomorrow when the Fed will release its decision.
