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Markets await Federal Reserve rate decision


US stocks declined lower on Monday, coming under selling pressure and trimming its big October rally as investors awaited Wednesday’s Federal Reserve decision for clues on whether officials will dial back the pace of rate hikes as early as December. Investors are now in anticipation of continued rate hikes from central banks that will cause a strong US dollar and elevated US bond yields, therefore the sentiment has exerted bearish pressure on equity markets at the start of the week where the FOMC is expected to deliver a fourth consecutive 75bp rate hike this week. Tepid Chinese data released at the beginning of the day and continued signs that global inflation is out of control have also fueled risk-averse sentiment.

On the economic data side, the annualized Eurozone Harmonised Index of Consumer Prices (HICP) jumped by 10.7% in October, which came higher above estimates of 10.9% and weighed on market sentiment. In the Eurozone, the hawkish expectations from the European Central Bank (ECB) and the multi-year high inflation data failed to provide support for the shared currency as Monday’s risk-aversion joined fears of more economic hardships for the old continent.

The benchmarks, S&P 500 and Dow Jones Industrial Average both retreated lower on Monday as the big-tech companies weighed heavily on the S&P 500. The S&P 500 was down 0.7% daily and the Dow Jones Industrial Average also dropped lower with a 0.4% loss for the day. Ten out of eleven sectors in the S&P 500 stayed in negative territory as the Communication Services sector and the Information Technology sector are the worst performing among all groups, losing 1.68% and 1.34%, respectively. The Nasdaq 100 dropped the most with a 1.2% loss on Monday and the MSCI World index was down 0.4% for the day.

Main Pairs Movement

The US dollar advanced higher on Monday, extending its intra-day rally and touched a daily high above 111.50 level during the US trading session amid a risk-off market mood. The Fed’s pre-anxiety continued to act as a tailwind for the safe-haven greenback as investors shifted to the risk aversion theme amid uncertainty ahead of the interest rate decision by the Fed. The central bank will announce its decision on Wednesday, which might hint it will start slowing the pace of rate hikes in December.

GBP/USD tumbled on Monday with a 1.26% loss after the cable saw a pullback and dropped to a daily low near the 1.1460 mark as UK’s business confidence has dropped to pandemic levels. On the UK front, the Bank of England is also expected to deliver another 0.75% hike on Thursday in an attempt to tame the soaring inflation pressures. Meanwhile, EUR/USD remained under pressure and refreshed its daily low under the 0.9880 mark amid downbeat market sentiment and US dollar strength. The pair was down almost 0.83% for the day.

Gold declined with a 0.69% loss for the day after refreshing its daily low around the $1,632 area during the late US trading session, as the rising hawkish Fed bets continued to undermine the precious metal. Meanwhile, WTI Oil retreated lower with a 1.56% loss for the day despite recovering some daily losses near the $86.20 area.

Economic Data

CurrencyDataTime (GMT + 8)Forecast
USDU.S. President Biden Speaks04:30 
CNYCaixin Manufacturing PMI (Oct)09:4549.0
AUDRBA Interest Rate Decision (Nov)11:302.85%
AUDRBA Rate Statement11:30 
GBPManufacturing PMI (Oct)17:3045.8
BRLBCB Copom Meeting Minutes19:00 
USDISM Manufacturing PMI (Oct)22:0050.0
USDJOLTs Job Openings (Sep)22:0010.000M