FOMC: Inflation & AI Stock Plunge In Focus
FOMC Up Next
The US Dollar is on watch this week as traders brace for the latest Fed rates decision on Wednesday at the October FOMC meeting. The market is widely expecting the Fed to keep rates on hold and, therefore, the bigger focus will be on the forward guidance offered by the bank. Market pricing for a hike in December remains above the 90% and, as such, the question now is whether the Fed will cement that expectation and help underpin the Dollar or fuel an unwinding of tightening expectations, leading to a fresh push lower in USD.
US Inflation Vs Stock Turmoil
The recent surge in US inflation is of course a big driver of the hawkish Fed argument. With headline CPI back up near 4% in September and energy prices still elevated a further Fed rate hike still looks reasonable this year. However, the recent period of market turmoil we’ve seen around the rout in AI stocks has raised some uncertainty in the outlook. Indeed, pricing for a hike this month plunged over the last fortnight as stock markets sank on AI funding fears linked to elevated capex levels and some key tech earnings misses. Traders will now be looking to see whether the Fed addresses this situation and to what extent it deems it a risk. Comments on this issue could be particularly market moving this week with any concern expressed by the Fed making USD vulnerable to a fresh push lower.
Technical Views
DXY
For now, the index remains magnetised around the 101.91 level following the correction lower from YTD highs. While above the broken bear trend line from summer highs, focus is on a fresh push higher and a test of the 103.20 level next. If we turn lower from here, trend line support and the key 100-level will be the next zones to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.