Markets await the Fed while Oil little changed after inventory build

Summary:

• Quiet days trade ahead of Fed rate decision

• Oil pauses after inventory build

• Is the Lira well placed to recover?

• Crypto gains as Google cancels ad ban

• How will the markets react to Fed decision?

The overall theme of today’s trade could be described as subdued with fairly small moves seen in most the major stock indices and FX pairs. This evening sees the Fed rate decision and it appears that traders are biding their time ahead of the event with an 8th hike of the current cycle widely expected. Given that markets have already widely discounted another 25 basis point  increase in the Fed funds rate, the main action from this evening's event will likely come from elsewhere with the removal of the word “accommodative” and the dot plot possible areas of interest.

The US inventory figure for crude oil has shown a weekly increase for the first time in 6 weeks but given that the increase was below the private API number it has actually caused a move higher in the market, with Oil moving off its lows in the initial reaction. The EIA figure itself showed an increase of 1.9M, above the consensus forecast for a 0.7M fall and the prior reading of -2.1M. However, given that last night’s API release showed a build of 2.9M the number could be viewed as more mixed.

One of the big stories of the year has been the turmoil in Emerging Markets with the space coming under heavy pressure as the USD appreciated and the Fed continued along their path of monetary tightening. The US central bank widely seen as hiking once more this evening and show little sign of altering course. Having said that, there is some suggestion that the large depreciations which culminated for the Turkish Lira last month, when the currency fell 20% in a day are a bit overdone.

There’s been gains seen across the crypto space today after news broke that Google was cancelling its ad ban.The company reported yesterday that it was planning to end its ban on cryptocurrency-related advertisements. What’s more, Google intends to allow regulated crypto exchanges to buy ads in the United States and Japan. The decision will come into effect since October. Ripple is once more the standout performer and higher by more than 10% on the day, with Litecoin another notable riser and higher by 6%.

This evening at 7PM (BST) the Federal Reserve are widely expected to announce the 8th 0.25% increase in the Fed funds rate of the current hiking cycle. The USD, Gold and US stock indices are all highly sensitive to the bank's policy decisions. How will they react?

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