iFOREX Daily Analysis : September 21, 2016
iFOREX | Sep 21, 2016 05:30AM ET
The dollar was almost unchanged against the other major currencies on Tuesday, after the release of downbeat U.S. housing sector data and as investors awaited the Federal Reserve and Bank of Japan’s highly-anticiated policy statements due on Wednesday.
The U.S. Commerce Department said housing starts dropped 5.8% to 1.142 million units last month, from July’s total of 1.212 million units, while analysts had expected a decline of 1.7% in August.
Meanwhile, the number of building permits issued declined 0.4% to 1.139 million units, from 1.144 million, while economists had forecast a 2.5% rise to 1.170 million units in August.
Today the U.K. is to publish data on public sector borrowing; Canada is to publish a report on wholesales; while the Federal Reserve is to announce its monetary policy decision and publish data on its economic projections for the coming two years.
USD/JPY
The yen edged higher versus the dollar on Tuesday, ahead of Fed and BoJ meetings.
Traders doubt the BoJ’s has enough in its tool kit to significantly push the yen lower, while regarding the Federal Reserve it is widely forecast that it will keep its rates unchanged on Wednesday.
But the Japanese yen weakened sharply after the central bank unveiled policy changes on Wednesday that showed a sharp new effort to spur inflation. Infact, it unveiled complex changes to its policy framework by setting a target for long-term interest rates that retains a ¥80 trillion asset purchase plan, but in a drastically rejigged fashion as part of aims to change inflation expectations.
Gold
Gold prices held steady in familiar territory on Tuesday, with investors largely sitting tight before the Federal Reserve and Bank of Japan issue highly anticipated policy decisions.
While the overwhelming consensus is for the Fed to hold rates steady, at the conclusion of its policy meeting on Wednesday, some market players expect it to drop a clearer hint that it is ready to raise rates by December.
Regarding the Bank of Japan policy meeting on Wednesday, the BoJ followed exactly investors’ speculation that it was going to make crucial changes to its easing program, cutting its interest rate deeper into negative territory, and changing its asset-purchase program or introducing new rules on the duration of securities it will purchase in the bond market.
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WTI Oil
Oil prices extended overnight losses on Tuesday, dropping to the lowest level in nearly six weeks, on profit-taking after Monday’ s gains and on hopes of an accord to curb supply.
Always yesterday the general secretary of OPEC said that a possible deal to support oil prices by the world's leading producer countries may last for one year, longer than other officials have indicated.
But oil prices climbed on Wednesday, supported by a reported draw in U.S. crude inventories and by firm import data from Japan. The main WTI price driver had been American Petroleum Institute data showing a 7.5 million barrel draw to 507.2 million barrels in U.S. crude inventories, the third weekly stock draw.
Today will be released official data from the Energy Information Administration.
US 500
Wall Street ended little changed on Tuesday, as healthcare gains countered declines in energy shares, a day before highly anticipated outcomes of monetary policy meetings in the United States and Japan. Though the Federal Reserve is not expected to raise rates on Wednesday, investors will comb the U.S. central bank's statement for any clues about whether it will hike in coming months.
The Dow Jones industrial average rose 0.05%, the S&P 500 gained 0.03% and the Nasdaq Composite added 0.12%.
Traders are projecting an 18% chance that the Fed will raise rates today, while the probability rises to 60% for a hike at its December meeting, according to the CME FedWatch website.
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