Welcome to FOMC day. After 10 years, the FED is ready to raise interest rates by 0.25%. This will be the last major trading event of 2015, after which liquidity will dry up. I would suggest sleeping in or relaxing today ahead of the event, wait for the announcement and the tone of the press conference.
Market Positioning appears to be more balanced going into today’s meeting as recent flow info has shown short covering from real money and leveraged players. So a USD sell-off isn’t a done deal. Actually, this means that a USD rally on a hike with hawkish rhetoric is more easily accomplished. Remember that consensus is for a hike with dovish rhetoric, so we will most likely not see much of a USD sell-off unless we get a big surprize either way.
I like UsdCad for USD-long plays and NzdUsd for Usd-short plays. On top of the USD moves, NZD has also been benefitting from higher Milk prices so it’s also moving on it’s own dynamics.
Looking forward: we do have a data rich day, with UK labour market statistics where average earnings are expected to fall, and the jobless claims change is expected at 0.8K. We also have Eurozone PMIs , which are expected to be little changed. Eurozone Inflation is more important and the markets are expecting more weakness with -0.2%.
Again, I’m going to stay flat today and just wait for the FOMC.