Date: 28 Oct 2019

Financial markets turn their attention towards the United States this week as the FOMC delivers a key interest rate decision, and the U.S economy releases a raft of high-impacting economic data points. Economists are currently split as to whether the Federal Open Market Committee will cut interest rates for a third straight month this coming Wednesday.

A sharp drop in U.S retail spending in September and below-trend inflation data could cause the Federal Reserve to cut interest as a preventative measure. Weaker quarterly U.S corporate profits and a major contraction in durable goods orders last week are also likely to cause concerns amongst FOMC policy members.

Other economists are also making the case that U.S unemployment remains historically low, while the pace of monthly U.S job creation still remains relatively strong. With market consensus split, it is likely that an interest rate cut this week could provoke U.S Dollar selling, as it may catch some market participants off-guard.

The U.S economy also releases core PCE inflation, housing, consumer confidence, and quarterly growth numbers prior to the actual FOMC policy decision. All of these key economic indicators have the potential to influence the outcome of Wednesday’s monetary policy decision from the FOMC.

Later this week, the U.S monthly jobs report is expected to show that the U.S economy created 105,000 new jobs during the month of September. The total number of U.S jobs added each month has been steadily declining lately, a worse-than-expected headline number could be heavily bearish for the greenback and equity markets.

Worryingly, the United States unemployment rate is also expected to move higher in September, to 3.6%. While the unemployment rate remains historically low, it is certainly noteworthy that as the U.S economy slows, unemployment could start to rise. The ISM manufacturing report is expected to show that the U.S manufacturing sector remained in contraction.

 

USD/JPY Daily Candlestick Chart | Source: ActivTrader

USD/JPY Daily Candlestick Chart | Source: ActivTrader

 

The U.S Dollar is still holding onto its recent gains against the Japanese yen currency, although the upside momentum from earlier this month has notably slowed. A break above the 109.00 level would be a major technical breakthrough for the USD/JPY pair this week and could set the stage for a stronger rally towards the 110.00 level.

 

Written by Nathan Batchelor, External Analyst, ActivTrades

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