Steen Jakobsen
The Bank of Japan has abandoned quantitative easing and the European Central Bank may taper its bond-buying programme, so what is the role of central banks in 2017, asks Saxo Bank’s chief economist Steen Jakobsen.
Article / 20 September 2016 at 7:00 GMT

Morning Markets: Could Fed surprise with a September hike?

Editor / Saxo Bank

Morning Markets: Prices


  • US: Housing Starts (1230 GMT)
The data are weak and the doves are many, but neither the big banks – Barclays and BNP in particular – nor investors at large are willing to entirely rule out a rate hike at this week's Federal Open Market Committee Meeting although the official chances remain low at one in five.

Today sees US housing starts up on the calendar, and's James Picerno says that a slight dip for August is more likely than anything else.

Meanwhile, Asian equities were quiet following a very slight down day on Wall Street. The USD remains bid against emerging market currencies and majors alike ahead of the FOMC outing.

Crude prices are rallying into the European open following a slump in yesterday's US session while gold appears to have successfully beat back an overnight slump towards $1,300/oz. This level, however, remains a crucial barometer of risk sentiment and dollar levels alike, and may well be breached should the greenback soar higher after the FOMC.

Market signals

Asian session

  • ASX has apologised for yesterday’s outage that forced suspension of trading
  • Australian business sales indicator up 0.6% for the month
  • Crude oil sank 0.5% to $43.07/barrel in New York
  • Milk futures climbed to $3,000/tonne ahead of a Global Dairy Trade auction
  • The NZD and the Taiwan dollar led gains among major currencies in mid trading
  • Weak US data have pushed the probability of a Fed hike this week to 20%
  • Barclays and BNP say the Fed will raise rates on Wednesday
  • Aussie 10-year bonds fell for the ninth day boosting yields to 2.13%
  • Asian stocks were largely flat ahead of BoJ and Fed decisions 

Forex ahead

  • AUD hit overhead resistance around 0.7570 and was back at 0.7536 in early trade
  • JPY was steady at 101.90 to the USD following a 0.4% advance in the last session.
  • The NZD appreciated 0.4% and the Taiwan dollar was up about 3% in Asia trade
  • EURUSD trading flat after yesterday's abortive attempt at the 1.12 handle
  • Sterling holding steady above 1.30 for the moment

From the Floor

Fed rates.I wish that they would go ahead and hike but that would be a tremendous shock to markets,” says Hardy

BoJ watch.USDJPY vols are a touch lower than for the Bank of Japan meeting in July but still close to the highest since the start of Abenomics,” says Larsen

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

1... 2... 3
US housing starts are expected to sustain a short-lived dip this month, writes James Picerno, before bouncing back.

Aussie hangover
The ASX edged lower at the open, a day after a technical fault shut the exchange for most of the day, writes the team at Saxo Capital Markets (Australia).

Quiet approach
Asian markets opened slightly lower this morning as the focus remains on the BoJ and FOMC meetings this week, writes Saxo's APAC trading team.

When in doubt do nothing
December is the new September, writes Juhani Huopainen, when it comes to action from central banks.

Rate hike

Markets and big banks are not willing to rule out the Fed's willingness 
to go for a hike at this week's meeting. Photo: iStock

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20 September
Stephen Pope Stephen Pope
There are few certainties in life...especially in financial affairs, however, a pass by the Fed seems highly probable.

Yellen is locked into being data dependent, therefore, to hike Fed Funds now would crystallise the short-term downside and create widespread uncertainty.

Of course the Fed is independent, however, with the election on November 8 looming large, it would be prudent to let September see no change.
20 September
Michael S. McKenna Michael S. McKenna
I agree, Stephen – particularly given the shakiness seen in US equities of late, I cannot see the Fed risking a pronounced correction in exchange for a 25 basis point hike. That said, we seem to be in uncharted waters in more than one regard lately.
20 September
fxtime fxtime
The Feds mandate does not permit any influence to national presidency election results and must remain neutral.....I cannot see how Yellen and her merry team can do anything at all due to the mandate and close proximity of the vote imho.


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