The Fed is facing moderate growth in the U.S. and the timing of its
next interest rate hike will be affected by the ongoing presidential
electoral campaign. The Federal Open Market Committee (FOMC) meeting in
July due to not featuring a press conference following the release of
the statement had always been an unlikely candidate. The September
meeting has 20 percent probability and the last meeting of the year on
December 14 has over 50 percent with the added benefit of not
interfering with the presidential elections.
The Federal Open Market Committee (FOMC) statement will be released
on Wednesday, July 27 at 2:00 pm EDT. There is no change expected to the
Fed benchmark rate and since this monetary policy meeting is not
followed by a press conference the language in the statement will be the
main focus as analysts try to gleam insight from the document.
The Fed is not expected to make the first move as other central banks
have more mounting pressure to act. The USD would gain from further
easing from Europe, Japan or the United Kingdom. The European Central
Bank (ECB) held interest rates and its quantitive easing (QE) on hold as
expected on Thursday, July 21. The EUR is weaker against major pairs
after there was not clear signal on what the next step for the central
bank is despite the anticipated negative effect of the Brexit vote on
European growth by forecasters.
The Fed has been forced to relive 2015 where more was expected from
the market but in the end only one rate hike materialized. The U.S.
economy continues to be the one that is growing at a slow but steady
pace in comparison to other major economies battling deflation.
The USD will be directly impacted by the language used in the FOMC
statement. Investors will be going through the documents trying to get
insights on the Fed’s view on the jobs market, inflation, growth and
global events. Another point to consider is the vote split. Kansas City
Fed President Esther George dissented in March and April but rejoined
the hold camp in June. Given the positive signs form the U.S. economy
and the limited impact of the Brexit shock she might once again push for
a rate hike in July breaking rank with the rest of Fed FOMC voting
important number is non-defense capital goods orders ex-air and it was
bang-on expectations so this isn't as bad as the first headline looks.
However, the shipments number is soft and that will be a drag on Q2
Alongside this report the commerce department is now releasing and advance wholesale and retail inventory report.