For the day ahead I’m concentrating on the interest rate decision from the Swiss National Bank and a breakout in the US dollar.
The Swiss National Bank decide interest rates today but given the main benchmark rate has been stuck at -0.75% for over 5-years there seems little chance of a move either way today. The SNB’s main policy tool of late has been FX intervention. The statement that “in light of the highly valued Swiss franc we remain willing to intervene more strongly in the foreign exchange market” is very likely to remain – especially in light of a recent pickup in haven flows to the yen and dollar that have seen those currencies appreciate - and presumably the franc too but the currency strength is not evident in EUR/CHF – one assumes because of SNB franc selling.
Economic projections were lowered at the meeting in June. Since then Q2 growth came in slightly better than forecast at -8.2% vs -8.5% but deflation got worse at -0.9% in August when -0.8% had been expected. All put together, a slightly lift to growth forecasts seems most likely.
Fed Chair Jerome Powell said new fiscal stimulus would help the economy but a new package before the US election looks increasingly unlikely. Amazingly, yesterday President Donald Trump said that he though the election result could go to the Supreme court – so he needed to replace RBG quickly to make sure there were nine justices. That seems pretty far fetched but adds to the fever pitch in the run up to the elections – and next week’s first debate.
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