Investors expect the central bank to hold rates steady, while Powell could deliver signals of when rate cuts could come
US stocks advanced for a fourth consecutive session to touch fresh 52-week highs on Tuesday after the official report showed that the US CPI rose mostly in line with expectations. The S&P 500 added 0.46%, the Dow Jones gained 0.48%, and the Nasdaq Composite advanced 0.70%. The tech-heavy Nasdaq and Dow touched their highest intraday levels since April and January of 2022, respectively. Now, investors turn their attention to the Fed’s policy announcement due later in the day. Market participants expect the central bank to hold rates steady, while Powell could deliver signals of when rate cuts could come.
In Asia, equities were mixed on Wednesday ahead of a decision by the US Federal Reserve on monetary policy at the conclusion of its two-day meeting. MSCI’s broadest index of Asia-Pacific shares outside Japan gave up 0.7%. Tokyo’s Nikkei 225 rose 0.25% after the Bank of Japan’s quarterly Tankan survey showed that business confidence at large manufacturers in Japan improved in October-December for a third straight quarter. The S&P/ASX 200 in Australia was up 0.31%, while the Shanghai Composite index in Beijing was down 1.15% as investors were disappointed by a lack of significant stimulus steps from a two-day annual meeting of Chinese leaders.
Similarly, European stock markets opened mixed today as investors look nervous and indecisive ahead of Fed’s verdict. The pan-European Stoxx 600 opened little changed, with oil and gas stocks leading losses as Brent crude slipped to fresh six-month lows amid persistent concerns about oversupply and weak demand. The FTSE 100 index advanced marginally even as the data showed that the UK economy contracted 0.3% in October, with the country’s services, production and construction sectors all shrinking. US stock index futures are also more tentative after some gains from yesterday.
Meanwhile, the US dollar holds steady in anticipation of the Fed decision. The USD index keeps clinging to the 104.00 mark after a brief dip towards the 103.50 zone yesterday. The central bank will likely maintain a more hawkish hold but may struggle to send a sufficiently hawkish message to markets. If so, the greenback could be disappointed. On the downside, a failure to make a decisive break above 104.00 would pave the way to the mentioned support, followed by the 103.30 intermediate barrier on the way towards the 103.00 figure.