FOMC Review

Notes From The Statement

As expected, the October FOMC meetings saw the Federal reserve keep rates unchanged but the language used in the accompanying statement was to the pleasing of Dollar bulls as the Fed struck a much less Dovish tone than in recent statements, spurring firm USD buying following the statement.

The statement seemed clearly tilted towards highlighting the strong chance of a December hike as the Fed acknowledged that since their September meeting data “suggests that economic activity has been expanding at a moderate pace” and the “unemployment rate held steady” noting also that spending and investment “have been increasing at solid rates” – an upgrade from “moderately” in the September statement.

Although the Fed are still “monitoring global economic and financial developments” they remain confident in their expectations for “inflation to rise gradually toward 2 percent over the medium term as the labor market improves further”.

A further important change from the September statement was in the specific reference made to the December meeting whereby the statement noted that when “determining whether it will be appropriate to raise the target range at its next meeting” the committee will “assess progress – both realized and expected-toward its objectives of maximum employment and 2 percent inflation” – an upgrade from simply” in determining how long to maintain this target range”.

Summary

In all, whilst the statement contained only very few changes, the tone had a Hawkish skew and seems to highlight December as a clear possibility. If the Unemployment rate continues to fall and factors affecting inflation can continue to stabilise and recover then conditions will likely be met. As ever, the Fed is remaining “data dependent” and so upcoming economic data releases between now and then will be of high importance with focus first of all on next week’s NFPs.

Trade Idea update.

  • Our EURUSD short idea was triggered on the break below 1.10  dropping 100 pips to test the rising trend line from 2015 lows. Trade will now be managed accordingly with the stated targets in mind. If not already short, rebounds into 1.10 present good opportunity for fresh entries.
  • May & July lows against 1.08 next target

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