The financial markets stabilized as focus now turns to FOMC announcement today. DJIA rebounded overnight and closed 189.68 pts, or 1.09% higher at 17630.27, back above 55 weeks EMA. S&P 500 also closed up 25.6 pts, or 1.24% at 2093.25. Meanwhile, gold continues to stay in tight range below 1100. Crude oil also recovers mildly and is back pressing 48 level. The dollar index is trading softly around 96.6 and is trying to draw support from 55 days EMA. Dollar is mildly higher today but remains the weakest major currency this week so far. New Zealand dollar continues this week's recovery in spite of dovish comments from RBNZ governor. Other major currencies are relatively mixed.
The focus of today is the FOMC meeting. We advised investors to pay attention to the change in forward guidance in the statement. Indeed, the Fed had hinted the market in its statements through language change ahead of tightening cycle started in June 2004 and in June 1999. the likelihood for the Fed to hike interest rate in September would be significantly increased if there's such a change this month. Undoubtedly, we expect the Fed to emphasize that any rate decision would be data-dependent. More in Watch For Forward Guidance In July FOMC Statement.
In Eurozone, Greek stock market will reopen today or tomorrow after a month-long shut down since June 29. Greece submitted a proposal to ECB for reopening the market but approval was delayed as ECB was concerned that investors would pull out cash from banks into securities, which cause extra strain to the system. But after all, ECB approved of the reopening yesterday with some limitations for local investors.
RBNZ Governor Wheeler affirmed in a speech before the ExportNZ/Tauranga Chamber of Commerce audience that further rate cut is likely but large reductions would only "be consistent with the economy moving into recession". As mentioned in the press statement accompanying the speech, Wheeler indicated that "at this stage some further monetary policy easing is likely to be required to maintain New Zealand's economic growth around its potential, and return CPI inflation to its medium-term target level. Further exchange rate depreciation is necessary, given the weakness in export commodity prices and the projected deterioration in the country's net external liabilities over the next two years". Wheeler noted that large declines in interest rates over coming months that could only be consistent with the economy moving into recession. He suggested that the RBNZ would "review our growth forecasts in the September Monetary Policy Statement but, at this point, we believe that several factors are supporting economic growth".