We saw a change in direction as far as Brexit is concerned yesterday evening with the House voting for a 12th Dec 2019 general election at the fourth time of asking. Labour seemingly backed the motion due to the threat of a 31st October ‘no deal’ Brexit being taken off the table, with the EU formally agreeing the Brexit deadline to January 2020 earlier in the week. Markets will now be keeping a close eye on the election manifestos from the major political parties, in addition to the pre-polls which currently have Conservatives in a comfortable lead. Despite the change in direction from the House, Sterling was little changed yesterday, trading within an extremely tight range versus both the Euro and US Dollar. Over the coming weeks, once manifestos and opinion polls start being released, Sterling could become fragile to changing sentiment.
US data and and interest rate decision take centre stage
In the meantime, ahead of today’s US interest rate decision, the consumer confidence unexpectedly fell in October amid household concerns about the short-term outlook for business conditions and job prospects. Despite the slide, Lynn Franco, director of economic indicators at The Conference Board stated that “confidence levels remain high and there are no indications that consumers will curtail their holiday spending.”
The key focus today will be on the FOMC meeting this evening where it is highly anticipated that rates will be cut for the third successive time by 25 basis points. Prior to the interest rate decision, the ADP employment report could give an early indication of the all-important jobs numbers on Friday. Of greater interest will be the first estimate of US Q3 GDP. The headline figure is expected to show that the pace of growth slowed to 1.6% annualised from 2.0% in Q2. The report will be deciphered for details on growth and the thought process that growth could decelerate further.
After the European markets close the FOMC will release their rate decision; whilst the action of a cut is priced in the statement is not so much. Economists are divided on the likelihood of further action, some arguing that the Fed may now pause to consider the impact of their previous moves, whilst others believe that further cuts will be signposted. The FOMC will be privy to the headline Non-farm Payroll numbers which is due on Friday and are expected to be the lowest reading since March, which could dictate the tone of the statement.
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