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European Central Bank President Mario Draghi shook the market. He pointed decisively towards more stimulus measures centered on rate cuts, blaming prolonged economic uncertainty for the bank having to reopen its toolkit. Government bonds had a field day and stocks jumped.
Draghi’s colleague Peter Praet also said the ECB is not to blame for all the uncertainty. The next ECB meeting will be a live one, but before starting to consider that, and indeed the Bank of England on Thursday, it’s going to be the Federal Reserve that takes center stage…
Federal Funds Rate (21:30)
Over to Jerome Powell and his colleagues, with the Fed decision due after Europe closes on Wednesday. The attention will be on when the central bank is going to cut rates, with no move expected this week but a quarter-point cut considered the most likely move eventually. As Powell and his cohort are becoming accustomed to, they’ll make the decision in the shadow of a Trump administration which is said to have looked into the legality of demoting the chair.
The big question is whether Fed officials consider its time to do it, or if they can wait to gather more data before dropping the rate-cut bomb. By the end of last week, odds for a rate cut next July were of about 80%, and a clear sign toward such a move will be Fed officials dropping ‘patient’ from the statement. If that’s not the case, the greenback could get a nice boost, although Wall Street will probably suffer. Market’s eyes will also be on the dot-plot and any change there.
USD/JPY slides back closer to 108.00 mark, focus remains on FOMC
The USD/JPY pair came under some renewed selling pressure on Wednesday and is currently placed at the lower end of its daily trading range, around the 108.30-25 region.
Trading Central – USDJPY : sentiment is a sell to 106.70 if Below 109.75.
Trading Central – USDCHF : sentiment is a sell to 0.9855 if Below 1.0080.
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