GBP Struggles, FOMC and SNB Meetings Loom
- The GBP has struggled in early European trade after the latest batch of UK CPI data printed much lower than what markets had anticipated.
- Core YY falling to 6.2% and headline YY falling to 6.7% (despite recent jumps in energy prices) gives the BoE something to celebrate this week.
- The miss in CPI has affected market expectations for tomorrow’s BoE by quite a bit. Before the meeting markets were pricing in an over 80% chance of a hike, and those odds have now fallen to 55% odds for a hike. That makes tomorrow’s meeting all the more interesting for Sterling traders.
FOMC and SNB Meetings in Focus
- The main event for markets today will be the FOMC policy decision. Markets are widely expecting rates to be kept unchanged, which means all the focus will fall on the forward guidance and projections.
Hawkish: A 5.6% 2023 but a higher revision for the 2024 dots (5.0% or higher) which will signal more support for keeping rates higher for longer, as well as a decent GDP upgrade for 2023.
Dovish: A lowered estimate for 5.6% to 5.37% (that will be the bank’s way to signal that there won’t be a Nov hike), as well as a lowered 2024 dot (opening room for a 1H24 cut).
- The other event to keep on the radar is the SNB policy decision coming up nice and early tomorrow morning.
Overall Risk Sentiment
- Risk appetite is mostly positive with equities and high beta FX higher, but commodities are more mixed. Safe havens are mixed with safe haven FX lower, while equity volatility and bonds are mixed overall. Keep in mind risk sentiment can be fickle so tracking it throughout the session is key.
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