For today, the data calendar is very much on the light side, so trading ranges are likely to be on the tight side ahead of the central bank meetings later this week.
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THE ECONOMIES: Japan’s economy is barely growing. REUTERS picThe dollar was buoyant against the euro and yen early on Monday as a prevailing risk-on mood continued to support the USA currency and assets. Gold could have a mixed reaction to the news from the Fed and the BoJ later in the week. “Of the two there are positioning expectations more clearly built into the BOJ”, said Richard Cochinos, a strategist with Citi in London. The overall trade balance came in at a surplus of ¥693 billion, better than the ¥495 billion expected.
“Investors are still cautious to take on riskier positions”, said Chris Eng, who is head of research at two units of Malayan Banking Bhd., which manages the equivalent of $6.1 billion. September Crude Oil weakened on Monday as traders continued to react to Friday’s news from Baker Hughes of another increase in oil rigs.
“A balanced assessment will be viewed by traders as leaning hawkish and a strong U.S. dollar reaction is likely, as the market has priced in the probability of a December rate hike”, Innes said. MSCI’s 46-country All World index could not push over peaks hit last week after some record highs on Wall Street. If it highlights the recent better-than-expected economic reports, economists may move up their predictions for when the next rate hike could happen.
“Dollar/yen could test the 108 handle if the Fed’s comments this week are supportive towards a rate hike and if the BOJ eases”, said Koji Fukaya at FPG Securities in Tokyo.
While the BOJ has actually successfully rushed hopes that it would embrace unconventional “helicopter cash” stimulus techniques, the marketplace has actually still preserved its expectations that the reserve bank would alleviate in one form or the other.
While the Fed is widely anticipated to stand pat on financial policy, investors will be sorting through its statements for the slightest hint of a near-term rate increase. A few weeks ago that probability was less than 20 percent. Market chatter about politics and global money flows is ongoing. Analysts from Italian bank Unicredit said they believed that would be temporary.
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The market also expects forthcoming fiscal stimulus to prop up Japan’s anemic growth, limit deflationary pressures and counter possible drawbacks from global events such as the UK’s decision to leave the European Union.
