S&P 500 — US Large Cap Index
FTSE 100 — UK Blue Chips
Euro Stoxx 50 — Eurozone Leaders
DAX 40 — German Equities
CAC 40 — French Market Index
Nikkei 225 — Japan Benchmark
Hang Seng — Hong Kong Index
Shanghai Composite — China Mainland
ASX 200 — Australian Market
TSX Composite — Canada Index
Nifty 50 — India Large Cap
STI Index — Singapore Market
KOSPI — South Korea Index
Bovespa — Brazil Equities
JSE Top 40 — South Africa Index
IPC Index — Mexico Market
Commerzbank’s Antje Praefcke argues that the FOMC under Chair Kevin Warsh is likely to deliver a “hawkish hold”, with markets already pricing at least one Fed rate hike by year-end. She highlights that recent declines in energy prices and a softer June inflation print reduce the odds of an immediate hike, limiting upside for the US Dollar and leaving EUR/USD sensitive to any scaling back of Fed tightening expectations.
Hawkish hold risk for Dollar
“In all likelihood, this overall situation should lead to a “hawkish hold” this evening. The market expects at least one interest rate hike from the Fed by the end of the year and sees a chance that more could follow next year as well. It does not want to completely rule out an interest rate hike even today, even though it sees only a low probability for this to happen.”
“For EUR/USD today, the key question is whether these expectations will be fueled – or not.”
“If the market scales back its expectations because the (possibly shorter than usual) FOMC statement or Warsh’s press conference suggests that the Fed views price risks as manageable and, above all, temporary, a correction in the USD is certainly possible.”
“After all, it is unlikely that Warsh will adopt an extremely hawkish stance given the recent drop in energy prices and a surprisingly low June inflation rate.”
“Consequently, upward pressure on the US dollar driven by rising expectations of interest rate hikes is also unlikely.”
