The market will be very disappointed if the Federal Reserve does not cut interest rates at its meeting this week for the first time in ten months According to analysts, the market is pricing in at least a 25 basis point cut on Wednesday evening, following a string of soft data over the past week
US consumer confidence fell to a nine month low last month, industrial activity is stalling and the economy continues to shed jobs, particularly in the manufacturing sector. According to the Labour Department on Friday, manufacturing jobs fell 49,000 in October after falling a revised 39,000 in September. Employment in the sector has declined every month since July 2000. "The upshot of all this is that the chances of a Fed cut at this week's meeting have increased markedly," said Simon Barry, economist at Bank of Ireland Treasury. "Current pricing in the futures market suggest major disappointment in the event of no change.
The US central bank had until recently not been expected to move until early next year. If it eases rates on Wednesday, the European Central Bank and the Bank of England may follow suit, although questions remain over whether the ECB will move this week or wait until December //www.fxcentre.com