Gold Slightly Up Ahead of FED Statement

Mohan Shenoi

CURRENCIES: The dollar rose to 111.52 yen from 111.39 late Monday. As it were, the Fed, like the ECB, BOE, and RBNZ, in an effort to become transparent, has become predictable: they will only make a major policy change (i.e., hike rates) with justification in hand and an opportunity for Chair Yellen to explain to markets why they made their decision.

Dow Jones Industrial Average futures were up 0.08%, S&P 500 futures added 0.08%, and Nasdaq futures increased 0.1%.

In the Asian trading, the NZ dollar fell to 81.40 against the yen and 1.0978 against the Australian dollar, from an early more than a 6-week high of 81.86 and a 4-week high of 1.0921, respectively.

The Federal Reserve is widely expected to leave interest rates untouched after the two-day policy meeting this week, but economists are split on whether the impact of Hurricanes Harvey and Irma will create enough uncertainty to delay the next tightening move until 2018.

The U.S. central bank is set to announce the start of a plan to trim its $4.5-trillion portfolio of assets, much of it amassed in response to the 2007-09 financial collapse, marking another milestone in bringing the crisis-era measures to an end.

Fed funds futures are now pricing in a almost 61% chance of a 25-basis-point increase at the December meeting, putting the federal funds rate at 1.25% to 1.5%. The incoming data from the United States has been mixed over the past couple of weeks and not strong enough for the Fed to lean this way or the other but with the inflation holding steady, though below target, the Fed would not want to shut the door on the rate hike just yet.

The U.S. central bank's description of inflation in its policy statement as well as fresh economic forecasts from individual policymakers will be the main focus for financial markets amid a recent spate of lukewarm domestic data.

ANALYST'S TAKE: "On the political front, no prizes for guessing that North Korea will top the agenda of President Trump's address to the gathering of world leaders at the U.N.", Rob Carnell of ING said in a report.

President Trump speaking in front of the United Nations in NY delivered his maiden speech and took the opportunity to threaten North Korea.

Elsewhere, EUR/USD added 0.13% to 1.2010, while GBP/USD climbed 0.58% to 1.3578, re-approaching Monday's 15-month peak of 1.3620.

BONDS: Bond prices rose. India's Sensex gained 0.6 percent to 32,472.62.

ENERGY: Benchmark U.S. crude fell 36 cents to $49.53 per barrel in electronic trading on the New York Mercantile Exchange.

The greenback held steady against the euro in the European session, following a 9-day decline to 1.2020 at 9:45 pm ET.

- Crude oil futures were higher with West Texas Intermediate crude oil for delivery in October up 0.8% at $50.31 and Brent crude for delivery in November up 0.5% at $55.88.

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