Marking Time Ahead of Likely FOMC Rate Hike Later Today and Kavanaugh Hearing Tomorrow

September 26, 2018

The FOMC policy announcement today at 14:00 EDT (18:00 GMT) is expected to justify another 25-basis point rate hike now and to leave in play a possible fourth move this year in December. New forecasts will be unveiled, and Chairman Powell will preside over a press conference starting at 14:30 EDT to explain the latest thinking of Fed policymakers.

In advance of the Fed’s move, the Czech National Bank raised its 2-week repo rate by a further 25 basis points to 1.50%. This was the sixth increase of this normalizing cycle that began in August 2017 with a 20-basis point move. The other five increases in November 2017 and February, June, August, and September of 2018 have all be quarter percentage point advances.

The dollar is unchanged against the yen, loonie and peso. The greenback is otherwise narrowly mixed, with upticks of 0.3% relative to the Swiss franc and sterling, 0.2% versus the euro, and 0.1% against the yuan, but downticks of 0.6% against the Turkish lira, 0.4% vis-a-vis the South African rand, and 0.1% against the Australian and New Zealand dollars.

Equities in the Pacific Rim rose 1.0% in Hong Kong, 0.9% in China, 0.4% in Japan and 0.1% in Australia and Singapore. South Korea’s market remained shut for the Chusok Holiday. Stocks in Europe are so far up 0.3% in France ,0.2% in Spain, and 0.1% in Switzerland and Britain. The German and Italian markets have edged marginally lower.

Ten-year sovereign debt yields have fallen 3 basis points in the U.K., 2 bps in the U.S., and one basis point each in Japan and Germany.

WTI oil and Comex gold have slipped 0.3% and 0.2%, respectively.

Austria’s manufacturing purchasing managers index dropped 1.4 points to a 23-month low of 55.0 in September, a level that nonetheless shows faster improvement than the long-term average of 52.3.

French consumer confidence slipped two points in September to 94, its weakest level of 2018 and down from 104 in the first month of the year.

Great Britain’s distributive trades index dropped back to a 2-month low of 23 in September from an August reading of 29. Sunday will complete three-fourths of the two-year block of time for negotiating terms for leaving the EU. Little has been accomplished. Time is running short.

The Swiss ZEW expectations index fell 16.5 points to a reading of minus 30.8 in September. This was the third negative result in a row lifts the cumulative drop so far in 2018 to 82.8 points from a score of 52.0 last December.

New Zealand posted a record monthly trade deficit of NZD 1.484 billion in August. The deficit during the last 12 reported months totaled NZD 4.814 billion. The ANZ business confidence index for New Zealand rebounded from a roughly 10-year low of minus 50.3 in August to -38.3 this month.

Sweden’s trade deficit of SEK 5.3 billion in August was not quite as great as that of SEK 6.7 billion in August 2017, but the year-to-date deficit continues to run way above its pace in 2017.

Singapore’s industrial production in August fell 2.0% on month, about three times more than forecast, resulting in a halving of the on-year increase to 3.3%.

U.S. new home sales data get released later this morning.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.





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