Investors continue to gear up for Thursday’s FOMC rate decision with markets drifting sideways but with a bearish bias, meanwhile volatility remains at elevated levels compared to the rest of 2015. There is a palpable nervousness with the decision nearing as there is still a chance the Fed will move to raise rates for the first time in nine years, despite calls from many major institutions such as the IMF and World Bank to delay a hike until later. The focus remains on the incoming US economic data and today we see retail sales and industrial production which could easily impact the dollar.
Ahead of the US data we see UK inflation figures which could see a dip back into deflationary territory given expectations are for a Y on Y figure of 0.0% and the price of oil has remained anchored. This data comes ahead of Wednesday’s unemployment and average earnings release, then retail sales on Thursday, so a busy week for sterling and could be even more so if the Fed does hike that evening as markets expect the Bank of England to commence their tightening cycle soon after the Fed’s.