Market Update – 26th September 2018 – Markets Mixed Ahead Of U.S Fed Funds Rate Tomorrow Morning

European and U.S stock markets finished the overnight session mixed with the tech heavy NASDAQ up around 0.2% while the S&P 500 and Dow Jones fell and European equities gained. Markets have over the past week been broadly more buoyant following the implementation of Trump’s tariffs on China and continue to look reasonably well supported. The AUD which has had a good week in terms of gains, has come off a little from yesterday but remains a good bit higher than where we were trading earlier in the month.

The U.S Federal Reserve meet early tomorrow morning (Australian time) to discuss and set interest rates with the market expecting another 25 basis point increase to their benchmark rate up to 2.25%.  However given that the rate hike is entirely factored in and expected then we don’t expect to see any significant move in AUD/USD following the rate hike. We will however expect to see a fair bit of volatility as the market digests the FOMC’s statement on monetary policy which should give some indication of Jerome Powell’s next chess moves with respect to interest rates. Talk has been ratcheting up that Powell might slow the pace of rate hikes in the U.S amid fears of causing a market crash similar to what happened in 2007 when the Federal Reserve raised rates until the market broke. Powell will want to avoid this which could see him insert comments into his statement to telegraph a slowing pace of rate increases. This will see the USD come off the boil a bit further and therefore also see AUD/USD potentially make further gains.

AUD EXCHANGE RATES:

AUD/USD – 0.7217

AUD/GBP – 0.5467

AUD/EUR – 0.6138

AUD/NZD – 1.0873

AUD/JPY – 81.571

USD/BTC – $6,354

OTHER MARKETS: 

All Ords (XAO) – 6,299

Gold – A$1,657/oz

Silver –  A$19.97/oz

WTI – US$71.88/barrel

DATA RELEASES TODAY:

USD – Federal Funds Rate & FOMC Meeting at 4.00am (tomorrow morning)

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Patrick Downes

Senior Corporate FX Dealer

Phone Patrick – 0431 278 632 

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