We are a week away from the Federal Reserve’s November policy meeting, but it appears very unlikely we’ll see any significant change in Central Bank monetary policy. There are two reasons for this. Firstly, with US Presidential elections less than a week later (Fed meets on November 2; US elections on November 8), policymakers may choose not to influence the markets and risk increased volatility. Secondly, the Fed rarely acts without ‘justification’ and the next summary of economic projections will not be released until December.
Markets appear dismissive of a November surprise and are pricing in only a 17% chance of a rate hike next week. The market however are pricing in a 73% chance of a rise at the 12 December meeting. The US Dollar has eased from recent highs against a basket of major currencies after touching a near nine-month high on Tuesday as the greenback looked vulnerable to uncertainty surrounding Federal Reserve monetary policy and the U.S. election.
Elsewhere, orders for U.S. business equipment fell in September by the most for seven months, indicating corporate investment is having trouble gaining traction. Business investment remained slow in the third quarter as moderating demand and weakness overseas appears to have prompted companies to hold back. In addition the Conference Board’s US Consumer Confidence Index for October showed a decline from previous reading of 103.5 to 98.6, missing expectations of 101.5.