1. Dollar's post-Fed bounce fades
The dollar gave up most of the gains it made in response to the Federal Reserve’s inaction on Wednesday, as investors embraced the narrative of higher inflation tolerance being a long-term negative for the greenback.
The dollar had risen and risk assets had slipped after the Fed failed to give any hint of when it might increase its monthly bond purchases to give further support to the economy. That was despite signalling that U.S. interest rates are set to remain near zero through 2023.
By 6:30 AM ET (1030 GMT), the dollar index that tracks the buck against half a dozen developed-market currencies was back at 93.240, off 0.3% from its overnight high.
The move was helped by evidence that the global trend of easier monetary policy is on pause. Indonesia, Taiwan, Brazil and Japan all left their key interest rates and other tools unchanged in meetings over the last 24 hours, while the Bank of England is also expected to stay on hold when it makes its post-meeting statement at 7 AM ET (1100 GMT).
2. Trump leans on GOP Senators
President Donald Trump leaned on the Republican Party to approve more fiscal stimulus, in an effort to break a deadlock on Capitol Hill that is now visibly affecting the U.S. economy.
Trump urged Republican Senators to “go for the much bigger numbers” mooted by a bipartisan group of House lawmakers, who have proposed a compromise stimulus package worth around $1.5 trillion. So far, the Senate has only approved $650 billion of extra spending to support the economy through the fall, while the White House has suggested a package worth $1.1 trillion.
At his press conference on Wednesday, Fed Chairman Jerome Powell had again highlighted the need for fiscal policy to fill a gap in incomes created by government measures to contain the coronavirus pandemic.
3. Stocks set to extend losses on Fed disappointment
U.S. stock markets are poised to extend the losses that they made on Wednesday in outrage at the Fed’s failure to offer yet more stimulus candy. The disappointment hasn’t yet been mitigated by thoughts that Trump’s tweet could herald the approach of a much-delayed fiscal support package.
By 6:30 AM, Dow 30 futures were down 254 points or 0.9%, while S&P 500 Futures were down 1.1% and NASDAQ Futures were down 1.0%.
Stocks likely to be in focus on a day without major earnings updates include Snowflake Inc (NYSE:SNOW), which more than doubled on its first day of trading Wednesday in a reflection of how eager investors are to jump on any growth story. Also in the spotlight will be Oracle (NYSE:ORCL), whose deal to partner with TikTok in the U.S. reportedly doesn’t satisfy some of the U.S. officials reviewing the national security aspects.
4. Jobless claims, housing starts due
Weekly jobless claims data wlll be released at 8:30 AM ET, at the same time as August data for U.S. housing starts and building permits.
Initial jobless claims are expected to have continued their painfully slow decline with a drop of only 34,000 to 850,000 last week. Continuing jobless claims are expected to fall more clearly to a new post-pandemic low of 13.00 million, although it will - as always - be useful to cast an eye on the overall number of those claiming under all jobless-related programs. That had remained stuck at over 29 million in last week’s release.
High unemployment has fed through into a slowdown in retail sales growth, visible in August data released on Wednesday.
Figures from the housing market are, by contrast, expected to be a lot stronger: housing starts are expected to fall only marginally from last month’s 1.496 million, while building permits are expected to top 1.5 million for the first time since February.
5. Oil steady above $40 as 'OPEC+' ministers meet
Crude oil prices drifted, having reclaimed the $40 a barrel mark overnight on the back of a solid drop in U.S. inventories and signs of more production discipline from key exporters in the OPEC bloc.
By 6:40, U.S. crude futures were up 0.1% at $40.12 a barrel, while Brent futures were up 0.1% $42.27 a barrel.
The so-called OPEC+ bloc of producers will hold a ministerial meeting later to review the group’s plans to gradually raise production. The plans have had doubt cast on them this week by two gloomy forecasts for global demand from OPEC itself and from the International Energy Agency.