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General Market Analysis | 01 November 2023

US Stocks Rally into the Fed Rate Decision.

US Stock markets enjoyed another good day to maintain a positive start to the week as investors look ahead to today’s rate decision from the Federal Reserve Bank. The S&P led the way for the indices, finishing up 0.65% on the day followed by the Nasdaq which added 0.48% and the Dow which ended up 0.38%. US treasury yields were stable ahead of the key update with the benchmark 10-year notes trading at 4.875% and the interest rate sensitive 2-years at 5.071%. In currency markets, the Yen was smashed across the board as the Bank of Japan only delivered a minor tweak to policy and the dollar appreciated against most of the other majors. Both Oil and Gold dipped once again with no fresh escalation of conflict in the middle east.

It’s All About the Fed Today

Longer term traders are looking to negotiate nearly 3 full sessions today as they await the latest interest rate decision from the Federal Reserve Bank. The market is pricing in a 98% probability that the committee will keep the rate on hold, but the moves will come in the aftermath of the decision with the statement and Press conference likely to provide the market with its direction. Data has still been indicating a resilient economy in the US and if this is acknowledged by Fed Chair Jerome Powell and his team and we once again have a more hawkish leaning – “higher for longer” – then expect current trends of higher yields and a stronger dollar to take us into the new year.

Its Not All About the Fed Today

It isn’t actually all about the Fed today, there is a raft of other data points that traders will have to negotiate before we hit the end of the US session and hear from Jerome Powell and pals. We have already had an early wakeup call in the APAC session as the Kiwi employment data hit the market with much lower-than-expected results, leading to a sharp drop for the flightless bird. Later in the session we have the Caixin manufacturing PMI data due out of China and although the European session is expected to be quieter with both French and Italian markets on holiday, the New York session is set to be a cracker. We have 2 sets of job updates from the US, in the form of the ADP Non-farm data and the JOLTS Job Openings numbers followed by the ISM Manufacturing PMI, all this followed up by the conclusion of the latest FOMC meeting with the rate announcement and accompanying statement and press conference.