Macro: Sandcastle economics
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Is the market even trading on the basis of today's Federal Open Market Committee meeting? That's Saxo Bank head of FX strategy John Hardy's main question as we head towards an almost-certain interest rate hike with hawkish expectations built in across the board.
"One thing that could shake up expectations is Fed chair Powell stating that he wants to see press conferences at every Fed meeting, thus expanding the number of venues for potential rate hikes," says Hardy.
Investor expectations are divided between forecasts of three and four 2018 rate hikes, adds Saxo Bank head of commodity strategy Ole Hansen, but no move beyond the 3% terminal rate is expected.
Beyond the Fed and the dollar, Hardy sees EURGBP moving lower ahead of Thursday's Bank of England outing with the 0.83 level potentially coming into view as the Brexit discount on GBP dissipates.
Energy shares posted the strongest performance in equity markets over the past 24 hours, reports Saxo equities head Peter Garnry, with Hansen adding that the 2% breakout in oil prices Tuesday represented both a technical break of the extant triangle formation and a potential geopolitical shift in the wake of meetings between US president Donald Trump and Saudi crown prince Mohammed bin Salman.
"Bin Salman and Trump are looking to ramp up pressure on Iran in a move that could see the US impose further sanctions on Tehran," says Hansen, adding that such a move could resrict Iranian output by 250,000-500,000 barrels/day by year-end.
Further oil direction will be provided by today's inventory report from the US Energy Information Administration, which comes in the wake of API reporting a surprise drawdown Tuesday.
In single stocks, Garnry says that Facebook shares found strong support at the $161-162 level following their dip below the 200-day moving average, closing Tuesday's session at 168.15. "I think we are likely to see further volatility and big daily swings in FB," Garnry concludes.
Quarterly Outlook 2024 Q3
Sandcastle economics
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