EUR

Happy Fed Day to all who observe. With hours to go before the world’s most powerful central bank delivers its first post-pandemic rate cut, investors still have no clarity on how big it will be. The dollar is flat, Treasury yields are little changed, and North American equity indices are setting up for modestly-stronger open, as market participants cut risk into what could be characterised as the most deeply-untradeable announcement in recent memory. Data released yesterday morning refused to conform with the imminent-slowdown thesis. So-called control group retail sales – which exclude food, cars, gasoline, and building materials – climbed...

Markets are caught in an uneasy equilibrium as the Federal Reserve begins its two-day meeting. The dollar is changing hands at its weakest levels since January, the Japanese yen is retreating from yesterday’s high, both the euro and pound are consolidating their gains, and emerging market currencies are broadly on the defensive as traders cut risk into tomorrow’s decision. The scale of tomorrow’s rate cut remains deeply uncertain, but futures-implied odds on a 50 basis-point adjustment have climbed above 70 percent. This has very little to do with incoming economic data – no first-tier releases have been published – and...

Volatility is reverting lower across the financial markets, even as investors swerve between opposing viewpoints on what the Federal Reserve will do next week. The dollar is back on the defensive, Treasury yields are slipping, equity futures are setting up for a modestly-positive open, and oil prices are climbing. Odds on an outsized kickoff to the central bank’s easing cycle climbed yesterday after the Wall Street Journal’s ‘Fed whisperer’ Nick Timiraos summarised the current debate on the rate-setting committee in terms that seemed to favour a larger move. Referencing conversations with current and former officials, Timiraos said “The case for...