FOMC Day – Wednesday 3rd November

FOMC day has finally arrived. The Fed is widely expected to announce the start of its tapering of bond purchases. We all assume the Fed will want to tread very carefully as it exits super-loose monetary policy. Yet the Fed has more reasons than many to worry about the persistence of inflation and any acknowledgment of this should lift US rates and the dollar.

Fed Chair Jerome Powell has reiterated since the economy began to reopen that rising prices are the result of reopening bursts and supply-chain kinks, meaning inflation would be fleeting. But the data are increasingly undermining that view. A 39-year high in the quarterly Employment Cost Index, released last Friday, is one particularly worrisome development. Surging wages come as productivity is slowing; central bankers have been counting on a productivity boom to outpace and thus offset the impact of rising wages. The idea is that productivity growth would act as a shock absorber to cap overall inflation, but that assumption may not be so reliable.

Also, today look out for the October ADP reading and ISM services, both giving insights into Friday’s NFP. With the Fed starting tapering, arguably US rates markets become more sensitive to US data. The consensus seems to be for around a 400/450k increase in both ADP and Friday’s NFP.

DXY held support around 93.30/50 last week and today’s FOMC could be the catalyst for a test of big resistance at 94.50/70.

Wednesday 3rd November

Times below are GMT+2

14.15 – US – ADP Non-Farm Employment Change

Potential instruments to Trade: USD Crosses.

16.00 – US – ISM Services PMI

Potential instruments to Trade: USD Crosses.

16.30 – US – Crude Oil Inventories

Potential instruments to Trade: USD & CAD Crosses.

20.00 – US – FOMC Statement, Federal Funds Rate, & FOMC Press Conference

Potential instruments to Trade: USD Crosses.

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