U.S. Session Forex Recap – Nov. 3, 2016

  • ADP non-farm employment change at 147K vs. 166K forecast
  • U.S. crude oil inventories up by 14.4 million barrels
  • FOMC kept interest rates on hold at <0.50% as expected in 8-2 vote
  • FOMC: Case for tightening has strengthened but waiting for more evidence
  • FOMC: Growth has picked up, job gains remain solid

The highly-anticipated FOMC statement turned out to be a dud as rates were kept on hold while traders turned their attention to U.S. election updates.

Major Events:

FOMC statement – As expected, FOMC policymakers held their fire for now, deciding to keep interest rates unchanged at <0.50% for the time being. They did keep December rate hike expectations in play by citing that the case for tightening has strengthened but that they are waiting for more evidence of progress towards objectives for the time being.

Fed officials also noted that growth has picked up during this second half of 2016. They also dropped the line on how inflation could stay low in the near-term while affirming that job gains have been solid. Surprisingly, FOMC member Rosengren no longer called for a rate hike right there and then, leaving only two members dissenting the decision to hold.

As always, policymakers made a few tweaks in their official statement, which came out as mixed signals for market watchers. In their earlier statement, the FOMC noted that household spending has been “growing strongly” but now says that it is only “rising moderately.” They also mentioned that inflation “increased somewhat but is still below” target levels from their earlier assessment that it has “continued to run below” their 2% goal.

Another down day for U.S. equities – Wall Street is still feeling the election jitters as a few state polls are coming in. Stock indices ended in the red for the seventh day in a row, indicating that risk appetite has taken a hit and that this behavior could carry on until the official results are announced.

So far, swing states surveys from Quinnipiac University has Clinton leading in Pennsylvania, North Carolina, and Florida while Trump has advanced in Ohio. A Telegraph poll in Florida, however, has Trump up by 48% to Clinton’s 44% as the agency also predicted that the latter’s lead will continue to narrow as the FBI’s probe progresses.

The Dow 30 index slid 77.46 points (-0.43%), the S&P 500 index fell 13.78 points (-0.65%), and the Nasdaq was down 48.01 points (-0.93%). Still, rising odds of a Clinton victory could allow U.S. markets to recover, at least according to these U.S. election market tendencies.

 

Major Market Movers:

USD – The Greenback extended its slide against its peers as traders looked past the FOMC decision and focused on election-related uncertainties.

EUR/USD climbed from 1.1084 to 1.1119, GBP/USD advanced from 1.2278 to a high of 1.2355 before retreating to 1.2290, USD/JPY fell from 103.40 to 103.09, and USD/CHF is down from .9723 to a low of .9699 before popping back above the .9700 handle.

Watch Out For:

  • Japanese banks closed for the holiday
  • 12:30 am GMT: Australia trade balance (-1.71B AUD expected, -1.89B AUD previous)
  • 1:45 am GMT: Chinese Caixin services PMI (52.5 expected, 52.0 previous)

See also:

London Session Recap

Asian Session Recap

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