CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

FOMC Preview

Article By: ,  Senior Market Analyst
September 15, 2020 2:00 AM
When?

Wednesday 16th September (6pm GMT)


What to expect
The Federal Reserve Open Market Committee convenes this week for the first time since Fed Chair Jerome Powell announced that the central bank would shift towards average inflation targeting (AIT).

The central bank is not expected to adjust policy, despite Congress’ failure to agree to additional fiscal stimulus. Instead further clarification surrounding AIT and updated economic forecasts could drive both the dollar and the outlook for S&P500.

The Summary of Economic Projections (SEP) will be in focus, with inflation and growth forecasts set to dominate as well as the dot plot and what the new Average Inflation Target policy means there.

AIT
At the Jackson Hole symposium, Fed Chair Jerome Powell announced a shift in policy framework to allow for inflation to overshoot the 2% target for extended periods of time, to make up for the long periods of time that it has been under the 2% target. Investors will be looking for further clues on the targeting method and more broadly speaking clarification surrounding the method. 

The change in policy targeting is likely to reflected in the Fed’s dot plot, release in the SEPs. The dot plot could show a notable lowering of interest rate expectations over the longer term. Previously the Fed Funds had seen interest rates normalising after 2022.

Lower interest rate expectations could dampen demand for the US Dollar whilst boosting the outlook for riskier assets such as stocks, potentially pushing the S&P500 and the tech heavy Nasdaq back to recently achieved highs.

Comments to this end from the Fed could calm investors’ concerns over the lack of stimulus from Congress at least for the near term.

US Dollar Index
After dropping steeply over the past 4 months, US Dollar Index was showing some signs of rebounding in September, advancing 0.66% last week. This week, DXY is back trading on the back foot, shedding -0.3% and breaking through key support at 93.50, to strike a low of 92.88 on Monday.

The 4 hour chart shows the steep sell off coming into August. However, last month was more abut consolidation, only edging marginally lower compared to previous months.
With the price heading southwards, a breakthrough 92.70 could be considered a bearish signal opening the door to 91.75.
On the flip side a break above 93.65 is needed to negate the current bearish trend.



StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024