(30 October 2019 ) DAILY MARKET BRIEF 1:Heavy Calendar for FX Traders

Big day for the US today. First markets will get the first release of GDP then a few hours later the Federal Reserve’s rate decision. But let’s not forget ADP private employment (expectations 110k). US 3Q real GDP is expected to rise 1.5% q/q, decelerating from 2.0% in Q2. The US has to look inward for growth as recent quarters have been led by personal consumption expenditures. As for the Fed, we expect the FOMC to lower their policy rates by 25bp. There will be no updated economic forecasts, therefore the focus will be the post-meeting statement and Chair Powell’s press conference. There is a significant risk that the committee will signal that a pause is now more likely following three straight 25bp cuts. However, with the focus on growth risk over inflation concerns the perception of prolonged trade tensions could keep the dovish members in easing mode.

Thursday will bring the highly anticipated Bank of Japan meeting. While the BoJ peer group and EM counterparts have been easing, Japan has provided only dovish messaging. The headline narrative is a weakness due to the global economic backdrop; the reality has been Japan data has held up relatively well. Tankan is sable, manufacturing weakens has not spread to other parts of the economy and economic surprise indexed is now skewed to the upside. Inflation outlook remains dim but challenging the trend does not seem to be a priority. With the central bank having already throw everything including the kitchen sink to simulate price pressure pulling more levers with the limited effect is not an inspiring choice. In our view, the policy stance will remain unchanged. JPY has unperformed over the last month due to overstretching positioning and reduction of policy risks. The risk is balanced of USDJPY as strong Japanese equities (Nikkei hit 52-week high) will drive inflows (despite re-hedging exposures) yet rate spread will help retail position back into USD. USDJPY upside will be limited by 200d MA resistance at 109.40.

By Peter Rosenstreich