Article / 21 September 2016 at 11:33 GMT

Mid-session Europe: After BoJ, Fed takes the stage

Saxo Markets


Foreign exchange
The Bank of Japan meeting overnight may have introduced some volatility into the equation, but markets are already reverting to wit-and-see mode ahead of tonight's Federal Open Market Committee meeting.

The BoJ was doveish and not that many are betting on a different approach from the FOMC helping the mixed-message mantra dominate sentiment in the runup to the 1800 GMT release.


  • US FOMC meeting and press conference        (1800 GMT)

  • US Weekly DOE Oil Inventories                         (1430 GMT)


Forex developments

One of the key releases of the year for the FX markets – the FOMC September rate decision is coming out today at 1800 GMT and will be followed by Fed chair Janet Yellen's press briefing.

USD index has been showing signs of strength earlier in the day, in an attempt to test 96.25 and above, but the move yet proved to be shortlived with the indicator returning to below the 96 level. For the contracting triangle formation well seen on the weekly charts ,the main event of the evening might become a catalyst for the breakthrough.

Dollar Index ahead of the FOMC


USDJPY is trading in a wide range, following the BoJ monetary policy meeting decision, summarised as follows:

      1) the deposit rate has been left unchanged at minus 0.1%
      2) the asset purchase program to be continued until the 2% inflation target is reached
      3)  the regulator focus will be shifted to the yield curve management.

The initial reaction was an attempt to breach the 50-day EMA to the upside which worked as a resistance level at roughly 102.80, later during the session JPY cancelled out the slide returning to below 101.60.

Sterling is trading  flat, though trying to revert after yesterday’s dive below the key level of 1.30.
GBPUSD is currently strongly inversed to the USD index and may see some bouncing on the release.

FX Options volatilities

All eyes are fixed on the FOMC.

JPY vols have corrected lower as the BoJ event is now over. Overnight USDJPY has moved from 35 to 20 vols and 1-month is down two vols as well. The FOMC meeting this evening is an event with less expectations in terms of volatility compared with the BoJ event. Vols have also been sold a bit in other pairs after the BoJ, where 1-month EURUSD and GBPUSD are both down around 0.2 vol.

Fixed income






Last night’s BoJ’s announcement of new monetary policy measures has European indices trading sharply higher this morning.

Banking stocks lead the gainers today as the market also awaits the Fed’s interest-rate decision tonight.

Broker upgrades have also benefitted the banks with Barclays rising 3% with an HSBC buy rating and JP Morgan’s raised price target of ING Groep has the Dutch bank trading up 3.2%.

Amongst the fallers today in the UK are Bonmarche and Majestic Wine as both companies lost 25%+ off their share price due to profits warnings and trading updates.

Evotec trades 2% higher as the company announces a 5-year deal with Bayer. The research partnership is believed to be worth around €300 million to the German pharma in milestone payments.

US equity index futures continue today’s positive note and earnings of note to be released today include Bed Bath & Beyond, General Mills and Red Hat.


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Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.

 So now the BoJ has had its say, it's up to you FOMC. photo: iStock

— Edited by Martin O'Rourke

The Global sales Trading desk is a multi-asset team providing customised trading solutions


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