The JPY is the strongest and the CHF is the weakest as the NA session begins

The JPY is the strongest and the CHF is the weakest as the NA session begins. The USD is stronger. Those are what the numbers say. The stories have been about the central banks. The last 17-18 hours have had 3 central banks weigh in with their latest interest rate decision.

  • The Fed kept right on change as expected, but raise the expectations for rates going forward higher by 50 basis points in 2024. The end of year rate is now 5.1% versus 4.6%. The markets are tagging Fed policy as “higher for longer”. Rates have moved higher and the USD is higher too, and stocks lower. The US 10 year yield is up 10 basis points today moving to yet a another high going back to 2007.
  • The Swiss National Bank was expected to raise rates to 2% from 1.75%. Instead, they snapped the string of 5 consecutive rises by keeping rates unchanged saying that the “significant tightening of monetary policy over recent quarters is countering remaining inflationary pressure,” but added that “from today’s perspective, it cannot be ruled out that a further tightening of monetary policy may become necessary to ensure price stability over the medium term.” The SNB has the advantage of inflation. Switzerland’s annual inflation rate was 1.6% in August, well below the central bank’s 2% target and much lower than the euro zone’s 5.3% inflation rate. The USDCHF moved sharply higher after the decision (lower CHF). The price moved 200-day moving average of 0.90346 on its way to a high price of 0.90776. The current price is currently at 0.90488 still above the 200-day moving average
  • The Bank of England was expected to raise rates by 25 basis points to 5.5% from 5.25%. That was until the inflation data yesterday which came in weaker than expectations. The odds came down to a coin flip. The MPC kept rates unchanged at 5.25%. The vote was 5 – 4 in favor of keeping rates unchanged so there was no unanimity on the decision. The decision snapped the string of 14 consecutive rate hikes. The MPC cited a finely balanced decision between the risks of not tightening policy enough due to persistent inflationary pressures and the impact of previous tightening measures that have yet to fully affect economic activity and inflation. U.K. inflation for August was lower than expected at 6.7%, which influenced some economists and investors to anticipate the rate hold. The GBPUSD moved to new lows going back to March 27. In the process, the price fell below the 61.8% retracement of the 2023 trading range at 1.23142 and the swing low from May 25 at 1.2308. Those levels are now risk-defining levels for the pair. Staying below is more bearish. The current price is trading at 1.2267.

Now that all the central bank decisions are out, the markets will focus on the economic data today in the

  • The US. Initial jobless claims will be released at 8:30 AM ET with expectations of 225K versus 220K last week.
  • The Philadelphia business index for September is expected to dip into negative territory at -0.7 versus 12.0 last month.
  • At 10 AM, existing home sales for August will be released with the expectations of 4.10M versus 4.07M last month.
  • The leading index is expected to be negative once again at -0.5% versus -0.4%.

A snapshot of the markets as the NA session gets underway shows:

  • Crude oil is trading down $-0.46 or -0.50% at $89.21
  • Spot gold is trading down $10.34 or -0.53% $1920.37. Gold prices are trading back below its 200 day moving average in $1925.57.
  • Spot silver is trading down $0.06 or -0.29% $23.15
  • Bitcoin is trading at $26,717. At this time yesterday, the price was trading at $27,097.

In the US premarket for US stocks, major indices are trading sharply higher after closing at session lows (and lower) yesterday:

  • Dow Industrial Average futures are implying a decline of -207 points after yesterday’s fall of -76.85 points
  • S&P index futures are implying decline of -37 points after yesterday’s decline of -41.73 points
  • NASDAQ futures are implying a fall of -166 points after yesterday’s fall of -209.06 points

In the European equity markets, the major indices are not cheering on the central bank policy. All indices are lower on the day

  • German DAX, -1.22%
  • France’s CAC, -1.48%
  • UK’s FTSE 100, -0.27% %
  • Spain’s Ibex, +1.18%
  • Italy’s FTSE MIB, -1.55% (10 minute delay)

In the Asian Pacific today, equity markets closed lower as well

  • Japan’s Nikkei 225, fell -1.37%
  • China’s Shanghai Composite, fell -0.77%
  • Hong Kong’s Hang Seng, fell -1.29%
  • Australia’s S&P/ASX 200, fell -1.37%

In the US debt market, yields are higher

  • 2-year yield, 5.171% +5.2 basis points
  • 5-year yield, 4.615% +10.3 basis points
  • 10-year yield, 4.453% +10.7 basis points
  • 30-year yield, 4.495% +9.5 basis points

In the European debt market, benchmark 10-year yields are trading higher. The UK 10 year yield is leading the way despite the unchanged policy:

This article was written by Greg Michalowski at Source