The Fed's Inflation Complication | Vantage FX

The Fed’s Inflation Complication

September 17, 2015

The Fed’s Inflation Complication:
With all eyes on tonight’s FOMC decision as to whether the Fed will in fact hike rates and change any monetary policy projections, this morning’s daily market update will be a short one just looking at what happened yesterday. Keep an eye on the Vantage FX News Centre for a FOMC preview blog post coming soon, featuring a full rundown of the possible scenarios that could come into play tonight.

What has been interesting as we head into the decision has been every single one of this week’s data releases from the US have missed expectation, just adding fuel to the ready made wait and see excuse that the Fed has at its disposal. Last night’s inflation figures saw CPI m/m come in at -0.1% v the 0.0% expected and have been blamed on falling energy costs. With the Fed constantly repeating that weak inflation is a huge factor in why they are in no rush to hike, this number again pushes the economy further away from the 2% target and muddies the water just that little bit more.

SP500 4 Hourly:

Click on chart to see a larger view.

With inflation driven doubt combined with the general squaring of long USD positions, stocks again benefited, with the SP500 rallying back to test its most recent swing highs (and the 61.8% fib retracement for you tech heads) heading into the decision.

USDX Daily:

Click on chart to see a larger view.

Moving onto the US Dollar Index, with price sitting in the middle of this short term bearish channel, we really are in no mans land heading into FOMC. Once again, take these moves as sideways drift and the squaring of positions in a low liquidity environment.

Keep an eye on the @VantageFX Twitter account and the Vantage FX News Centre for a full FOMC Preview later today.


On the Calendar Thursday:
NZD GDP q/q (0.4% v 0.5% expected)
JPY BOJ Gov Kuroda Speaks

CHF Libor Rate
CHF SNB Monetary Policy Assessment
GBP Retail Sales m/m

USD Building Permits
USD Unemployment Claims
USD Philly Fed Manufacturing Index
USD FOMC Economic Projections
USD FOMC Statement
USD Federal Funds Rate
USD FOMC Press Conference


Chart of the Day:
Today’s chart of the day provides an update on a USD/CAD channel that we’ve been watching over the last couple of weeks.

USD/CAD 4 Hourly:

Click on chart to see a larger view.

Price has broken to the downside after last night’s squaring of USD longs heading into the FOMC decision. As we spoke about yesterday, I would be very cautious in looking for follow through on any breakouts like this in the low liquidity conditions we are currently experiencing.

This looks more like a sideways drift type breakout rather than a move with any sort of momentum behind it.

Do you see opportunity in trading FOMC?

Dane Williams – @VantageFX

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