Overnight the highly anticipated FOMC meeting concluded and as expected the Federal Reserve cut interest rates for the third consecutive time this year to a rate 1.50%-1.75%, with the US Dollar falling as a result. What was not a given was the rhetoric from the FOMC, with the market divided as to whether they could signal further rate cuts or not. The FOMC signalled that there would be no further reductions unless the economy takes a turn for the worse. FOMC Chair Powell went on to say, “we believe that monetary policy is in a good place”, and that “we took this step to help keep the economy strong in the face of global developments and to provide some insurance against ongoing risks,”. Essentially, it looks like the recent flurry of rate cuts from the Federal Reserve has come to an end for the time being, although traders will now be keeping a close eye on top line data from the States for clues of any potential downturn.
In terms of economic data, the US ADP employment report was released which is used to give an early indication of how the all important labour data. The ADP employment report private employers added 125,000 jobs in October, slightly above economists’ expectations. The market rarely reacts to this number due to the inconsistency with the headline non-farm payrolls. Overnight economic data from China was slightly disappointing and continues to paint the picture for a global slowdown. October Chinese PMI data were weaker than expected with the manufacturing indicator slipping to 49.3 (from 49.8 in September). A figure below 50 means that that the sector is contracting.
House of Lords backs election
In the meantime, the House of Lords has passed the election bill in one night, confirming Britain will go to the polls on 12th December. Baroness Evans of Bowes Park, leader of the House of Lords, opened the debate stating, “having an election will allow us to all put our cases to the public, gives them the opportunity to decide how they want to move forward, and to ensure the new government has time to act before 31 January 2020." Sterling was little changed on the news, with volatility likely to remain high in the coming months as the UK prepares for the polls.
Looking to the day ahead, economic data is fairly light. Eurozone inflation is expected to hit the wires and decrease but this maybe ignored as the ECB’s QE program restarted recently to address this. In the US the personal spending numbers maybe scrutinised for clues on consumer confidence as we approach the holiday season.
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