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Daily Brief

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FOMC rate decision today

Fed Rate Decision: 

The Federal Reserve kept interest rates unchanged at 1.50-1.75%, a move that was widely expected. The comments after the meeting indicated that the central bank does not expect any policy changes through 2020.  Fed Chairman Jerome Powell also said that the Fed would need to see a persistent rise in inflation before they would consider raising rates. 

The latest Fed announcement comes out following the release of last Friday’s strong economic data, where US jobs grew by 266,000 in November, much larger than the expected 187,000 jobs. The US equity market moved higher after the news. 

USD

The USD is trading quietly this morning ahead of the FOMC rate decision later today. The Fed is expected to keep rates unchanged at 1.50-1.75%. Comments from Fed officials have stated that their policy is in the “right place” for now. The statement accompanying the rate decision is expected to say no further adjustments are needed unless there are material changes in the US economic outlook. Traders will be looking at the statement to see when the next rate move will be in 2020. Assuming there are no surprises, the USD will continue to track the trade negotiations.

EUR

EUR has been trading quietly over the last 24 hours as traders await the ECB meeting tomorrow morning with new President Christine Lagarde. There are no expected changes in policy and the central bank is expected to keep rates unchanged.

GBP

GBP/USD is trading lower this morning, after the latest polls are showing that while the Conservative party is expected to be victorious, their majority will be much less than had generally been expected. The main concern here is the possibility of a “hung parliament”, which could create problems for Prime Minister Johnson moving forward. The latest poll shows a majority of only 28 seats, much lower than the 68 seat majority that was predicted a few weeks ago. According to the poll there is a wide margin of error, so movements in the pound over the next 24 hours should be “election news” driven.

JPY

Japanese Yen has been range trading overnight, but has now began to trend higher as traders continue to be concerned about the trade talks and Brexit, as UK elections are scheduled for tomorrow. The safe haven trading may not be affected by the Fed announcement later today.

CAD

The revamped NAFTA trade deal, now called the USMCA was signed in Mexico City yesterday, after getting backing from US House Democrats. The agreement should be passed quickly by the US House of Representatives, but could have problems in the Senate. Senate majority leader Mitch McConnell stated this trade deal will not be considered by the Senate before their congressional recess begins. It is possible this agreement will not be considered until after the impeachment trial ends, which could extend through February. USD/CAD and USD/MXN have had no reaction to the signing.

CNY

According to White House Trade Advisor Peter Navarro, there is no indication at the present time that the US will delay the December 15th tariffs. There have been no official comments from the US regarding a delay. US officials say talks are progressing, and the decision is now in China’s hands.

USD: Fed expected to leave rates unchanged.

USD: Fed expected to leave rates unchanged.

EUR: Trading quietly ahead of ECB meeting tomorrow.

EUR: Trading quietly ahead of ECB meeting tomorrow.

GBP: Polls show Conservative lead shrinking.

GBP: Polls show Conservative lead shrinking.

JPY: Safe haven trading continues to bolster the JPY.

JPY: Safe haven trading continues to bolster the JPY.

CAD: CAD does not improve despite USMCA signing.

CAD: CAD does not improve despite USMCA signing.

CNY: Officials are still hopeful for an agreement ahead of December 15.

CNY: Officials are still hopeful for an agreement ahead of December 15.

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