Markets are on tenterhooks ahead of the Bank of Japan meeting and statement today and the US Federal Reserve post-meeting update early tomorrow.
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While Vail, like most strategists and investors, expects the Fed to refrain from taking any new steps, she said its statement could include language that’s been missing from its recent assessments, such as whether economic risks were “balanced” or “close to balanced”. The dollar index rose 0.15 percent to 95.995, hovering just below the 96.108 mark touched on Friday that was the highest since September 1.
Besides the BOJ and Fed reviews, Japan releases data on trade and Malaysia updates on consumer prices Wednesday.
In other energy trading, wholesale gasoline sank 6 cents, or 4%, to $1.36 a gallon. While the economy appears to have so far ridden out the aftermath of June’s vote to leave the European Union better than financial markets had expected, the past week has brought the first serious discussions of the terms on which Britain will leave.
Sterling was down slightly on the day at $1.2982 GBP= after skidding to $1.2947 on Tuesday, its lowest since August 16. The Hang Seng in Hong Kong dipped 0.1 percent.
The U.S. central bank is widely expected to hold interest rates unchanged at 0.25 percent to 0.50 percent, and could hint at a rate hike by the end of the year. New Zealand’s S&P/NZX 50 Index added 0.2 per cent. Markets in China and Hong Kong have yet to start trading.
Volatility was especially acute in the yen with the currency trading 0.13 percent weaker against the dollar ahead of the decision.
Fed policymakers are wary of raising rates too quickly because the US population is getting older and productivity growth is declining.
A CNBC report Tuesday provided additional insight on the Bank of Japan and how its monetary policy will affect the global markets.
“They want to maintain market expectations for a rate hike in case they want to raise rates in December if conditions warrant one”, Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina, told Reuters. Shares were higher in Taiwan but mixed in Southeast Asia. The Standard & Poor’s 500 index added 0.64 points to 2,139.76.
U.S. Treasuries’ yields fell on Tuesday as traders bought longer-dated bonds on uncertainty over whether the Bank of Japan might decide to add more stimulus to boost its economy. It reached 130 basis points last Thursday, its widest level since June 27.
Oil had rallied on Monday before settling off its highs on scepticism over Venezuela’s bid to talk up a potential OPEC output freeze, and on indications US crude stockpiles had risen last week. Brent crude, used to price global oils, advanced 58 cents to $46.46 a barrel in London.
ENERGY: Benchmark U.S. crude rose 43 cents, or 1 percent, to $43.73 a barrel in NY.
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But Michael Jones of the Riverfront Investment Group says he expected the Fed to use “some hawkish [pro-rate hike] language that sort of sets the stage for future rate increases”.
