World markets mixed ahead of the Fed interest rates decision
World markets were mixed ahead of the Federal Reserve decision on interest rates later today. In Asia, Shanghai and Nikkei declined by 30 and 130 points respectively. In Australia, the ASX index declined by 10 points and in Europe, the DAX, Stoxx, and CAC rose by 85, 25, and 35 points respectively. In the United States, futures pointed to a higher open, with the Dow, S&P and Nasdaq futures gaining by 220, 25, and 60 points respectively.
The US dollar index declined today ahead of the Fed decision. It declined by 35, 20, and 25 basis points against the euro, yen, and Canadian dollar. Investors expect the currency to experience some volatility after the Fed releases its interest rates decision. The expectations are high this time because of the statements that have been issued by the US president and others against a rate hike. Other than the interest rates decision, traders will receive the existing home sales data and the current account from the United States.
The sterling was little moved against the USD after data from Office of National Statistics (ONS) showed that inflation cooled to a 20-month low in November. This decline was helped by falling oil prices. The numbers showed that CPI rose by 2.3% in the month, down from 2.4% in October. This was in line with the consensus estimate. This was a positive number for the economy because it indicated that wages rose faster than inflation. Last week, the numbers showed that average weekly earnings rose by 3.3% in the year to October. At the same time, the core CPI declined to 1.8% in November from 1.9% in the previous month.
The Canadian dollar weakened today after inflation numbers from Canada disappointed. The headline CPI rose by 1.7% in November, which was lower than October’s growth of 2.4%. The core CPI that excludes the volatile energy and food products contracted by minus 0.2%, which was lower than the previous growth of 0.4%.
The GBP/USD pair was little moved today even after the positive UK inflation data. The pair is trading at 1.2635, which is along the 50-day and 25-day EMA. On the four-hour chart, the price is also along an important resistance level while the RSI is along the neutral level of 50. In the American session, the pair will likely experience some volatility depending on the Fed decision.
On Friday, the EUR/USD pair started moving up from a low of 1.1270 and today, it reached a high of 1.1415. This is a 1.30% increase. The current price is higher than the 25-day and 50-day EMA. The Average Directional Index has eased from 37 and is currently at 30 while the Money Flow Index has moved closer to the overbought level. Like with the GBP/USD pair above, the EUR/USD pair will be the focus of investors when the Fed raises interest rates today.
After falling sharply during the Asian session, the XTI/USD pair was little moved today as traders waited for the official inventory data from the USA. The pair traded between 46 and 47. This is the lowest it has been in more than 15 months. On the hourly chart, the momentum indicator has just crossed the 100 mark as the 25-day and 14-day EMA attempt a bullish crossover. This could happen if the inventory numbers show a reduction. The downward trend will likely continue if the number shows more inventories.