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High Low High Low
EUR/USD 1.1299 1.1222 USD/ZAR 13.4995 13.3765
GBP/USD 1.5435 1.5329 GBP/ZAR 20.75 20.60
EUR/GBP 0.7360 0.7271 USD/RUB 67.38 65.39
USD/JPY 120.56 120.10 USD/ILS 3.9241 3.8429
GBP/CHF 1.5055 1.4903 S&P 500 1,983 1,973
GBP/AUD 2.1570 2.1350 Oil (Brent) 48.75 47.70

The lines have been drawn, the pistols are loaded and now we wait for 7pm tomorrow when quite simply the most important central bank meeting decision is announced. Will the FOMC raise US interest rates or will they hold off until December at the earliest. The 2 camps (Ye and Ne) are clearly marked and my impressions are that FX-Stock and Bond traders are looking for a hike, while economists are being drawn to the ne camp and calling for a the FED to remain on hold as the defer the rate hike as the FED assesses the risks to the recent financial markets crises (i.e., China). Data wise as we have seen, the FED has been supportive of a rate hike decision. Our friends at a large UK bank are of the opinion that FED Chair Yellen will emphasize data-dependence and that every meeting remains “live,” adding they believe concerns about external demand and inflation will delay hikes until March 2016. The Summary of Economic Projections (SEP) is likely to show revisions to 2015 GDP growth (higher), 2016 growth (lower on stronger USD), the unemployment rate (lower), 2015 headline PCE inflation (markedly lower), the longer-run FED funds target rate (25bp lower), and would not be surprised to see the longer-run unemployment rate, or NAIRU, fall to 4.8-5.2%. These changes to the outlook, along with a message of “not now, but likely soon,” will, in their view, lead the median policy path on the “dot chart” to fall 0.25% relative to June, with the risk of a larger 0.50% decline in 2017.

Good UK data yesterday (Inflation in line with forecast) and excellent Average Earnings (excl bonus) surprised today with a rise to 2.90% from 2.80% previously. As we know the BoE is watching this number VERY closely as to the decision on when to raise rates in the UK. With economists predicting a rise in inflation and now a rise in wage growth, the BoE will feel more confident that the hike is indeed coming in early 2016.

i will not want to keep you much longer, other than to say tomorrow will define a generation and impact your pensions amongst other things. No doubt the FOMC/FED are crunching numbers and burning the midnight oil in making their decision tomorrow. No doubt the decision they make is the one that they feel is in the best interests of the US and in turn have the least amount of impact on the rest of the world.


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