Markets position themselves ahead of key Fed decision

Summary:

• US stocks rise ahead of this evening’s Fed rate decision (7PM)

• Oil remains higher despite smaller than forecast inventory draw

• EURCAD near 5-month high as Canadian inflation falls

• Bitcoin surges almost 20% in three days

• Commodity wrap - Oil, Gold, Sugar and Wheat

The week’s trade has been dominated by this evening’s Fed rate decision as traders await the last major economic event of the year. The consensus seems to be calling for a further 25 basis point hike but an overall move to a more dovish message. The markets seem to be moving in anticipation of this sort of outcome with US indices rising off their recent lows, while the USD falls back and Gold has moved above $1250 to reach its highest level in several months.

There’s been some wild swings in the oil price of late and as such today’s inventory data may be even more keenly viewed than usual. Energy markets fell to their lowest level in over a year yesterday with decline in excess of 4% and 6% for Oil and Oil.WTI respectively but they have both bounced were trading firmly higher today by around 2-3% before the latest inventory data from the US. The weekly EIA inventories did show a 3rd consecutive decline, but a print of -0.5M was less negative than the -2.7M median forecast.

The Canadian CPI Y/Y for November dropped to 1.7% from 2.4% previously against expectations of 1.8%. A large part of the drop can be accounted for due to the recent plunge in oil prices, so a fairer reflection of the underlying price pressure can be arrived at by taking an average of the three “core” measures. The first of these, the common CPI Y/Y remained unchanged at 1.9% as expected, but the other two both showed negative surprises. The Median CPI Y/Y dropped to 1.9% with a median forecast for it to remain at 2.0% while the Trimmed CPI Y/Y fell from 2.1% to 1.9% against expectations of it being unchanged. EURCAD is trading close to a 5-month high today and the market is looking to make a firm push higher after breaking above the 200 day SMA once more at the start of the week.

Bitcoin price is soaring this week after seeing multi-month lows during the weekend. The bounce seems to be mostly technical – after breaking the key $6000 level, BITCOIN price nearly halved as $3000 was not only a psychological level (local highs from mid-2017) but also a target range of a big triangle formation. Moreover, it looks as if the bulls lost their hope during the sell-off, paving ground for a surprise recovery. It remains to be seen for how long will it last but as of now it’s the most dynamic since July. Traders may take long positions in BITCOIN if they believe in continuation of this rally or short positions if they see prices reversing lower.

Our latest commodity wrap focuses on Oil, Gold, Sugar and Wheat and can be found in full here.