 Okay, very good morning. I hope everyone is doing well. The day has arrived. It is the FMC decision date So it's Wednesday the 18th of September just as a heads up straight off the bat Sam and I will be covering and the rest of the team here in London the full FMC decision live via our YouTube channel So if you don't already do so all you need to do is subscribe to the channel and click the bell icon Which will turn on your notifications and you'll get an immediate push on your phone And you can join us live. So via your mobile. You'll be able to ask questions Listening to the session. We're gonna kick things off from 6 30 p.m. London time That gives us half an hour to do a bit of a preview for what it is that we're expecting from my side fundamentally And then from Sam in a technical setup sense from a trading point of view We'll then listen to the release and then we'll do a bit of a debrief We've also got the press conference and everything else so hopefully you can join us for that session So that does mean for my briefing this morning I'm gonna keep the Fed Conversation relatively short because I'm going to go into that in a much greater detail later on this evening When we cover it live. So first things first, let's just have a quick look at the the overall kind of sentiment for the market open and as you would expect ahead of that central bank decision things are relatively quiet the dollar index up a touch point one percent Cable and euro dollar trading just minor negative territory cable at the moment just having a little look at its daily Pivot level in the futures Gold down about four Dollars, but again some support seen at the overnight Asia Pacific low But equally around its pivot level as well the 10 year up about four ticks with just slightly negative Global stock futures seen this morning and overnight So as normally the case ahead of those big news driven events coming out of particularly the Federal Reserve It's almost like a wait-and-see now for how that plays out oil, of course Highly volatile over the last couple of days We had that huge record gap up and then big a biggest intraday move that we've seen ever And then we had to pull back to the technical relevant levels to then surge back higher after it was a bit questionable About how quickly they could get Production back online at some of their key facilities in Saudi Arabia the news broke yesterday And let me just refresh your memories of what exactly that was that was this that Saudi Arabia had partially restored output at the damaged oil plant Crude flow back to said to be a two million barrels per day And remember the impact overall at the beginning was understood to be about five point seven million barrels per day So that even though they're saying that production capacity may not be fully restored until November Catching the market a little off-guard Given how quickly they are looking to kind of mitigate that That circumstance that occurred at the or the situation that occurred at the weekend So that immediately caused some selling pressure But again finding although a bit messy some support around the same type of level that we did on the initial pullback on the beginning of the week What I would say is that you know, are we gonna get a gap fill eventually? Well, I do kind of think that this kind of area personally Let me just change my transition my charts here. So again, this was the ebb and flow of the price movement And yesterday finding some support roughly around that same area as we did on Monday morning But yeah, are we gonna get a gap fill down here? I don't think so personally I think that you know just given even though Yes, Saudi Arabia seemingly it seems they can they can get back on their feet quite quickly I would say that the geopolitical risk that has now picked up a notch or two on the back of now Where do we go from here? And obviously the tensions with Iran are not going anywhere anytime soon I do think that this kind of 58 kind of level here Perhaps a decent fair value for the moment with the fundamentals that are in play And so I continue to see this is quite a good strong area of support if broken short Potentially then on the same factor Could get a decent run lower, but for the moment I think that's going to be a pretty good area where we might start to see a bit of consolidation around between 58 and 60 essentially So with that in mind the pivot of 59 76 today in the futures From a trading point of view from the Saudi situation I would say that the kind of dramatic moves now now that we've had that news from yesterday about the latest Kind of tentative timelines about how quickly and to what amount they're going to get production back online I would say the kind of firepower of the ability of the headline news out of that situational region to impact the price Maybe dissipating a touch on the Saudi stuff Not unless there is obviously a new attack of some sort and then things could flare up, of course particularly quickly Just going straight to the news then let's have a just a quick overview as I said on the Federal Reserve I'll go into this in much greater detail later this evening But a divided Fed may be reluctant to forecast more cuts It's what Bloomberg are reporting this morning the FMC expected to lower rates, but dots may send Excuse me a hawkish signal oil price spike reinforces the sense geopolitical risks are rising so The reason why they're talking about this division is that that was apparent in the last meeting when the Fed Chose to cut rates for the first time in this kind of mid-cycle adjustment And it's believed to be that we're going to see to some dissenters today Esther George and Eric Rosengren the more outlying hawks arguing that we do not need to cut at all at this point We shouldn't have cut in first place Then you've got the likes of bullard who typically sits right on the other end of the spectrum saying that look never mind 25 how about 50 basis points so There definitely is a sense of division and of course this does Come at a time where There's arguments really for both sides if you think about things like non-farm payrolls perhaps a little bit softer It has been deteriorating albeit still holding up at relatively higher levels You've now got this geopolitical renewed risk perhaps in the Persian Gulf You've got the ongoing trade war risk of course as well the kind of the uncertainties around that However on the balance u.s. Economic data has definitely been improving In terms of when looking at all data sets and so there's definitely argument to suggest that perhaps perhaps We don't even need to cut today at all. What are the markets think? Well check this out This has been one of the most Rapidly changing graphics. I've seen for a Fed decision in quite a while And if you think about it we run the clock about three weeks or so possibly four and It wasn't a case of holding rates It was a case of 25 or 50 You remember when everyone was talking about the inversion of the yield curve and it felt like the media We're trying to tell us that the end is nigh and so on well That's disappeared the inversion of the yield curve no longer is apparent that has paired back a lot of that move In step with what I've said was improving economic data situation that we've seen in the States So now forget 50 no one in the market is anticipating 50 and in fact Today has almost become a toss-up between it's almost a 50-50 bet hold or cut 25 so I Am way more excited about tonight now than I was a few weeks ago because When you see a 56.5 to 43.5 percent probability, so still tilted slightly to a cut either way They go the markets gonna move sharply on that initial announcement depending on what option they take But of course we know with the Federal Reserve. This isn't just about this hike It's about the subsequent hikes thereafter So this is looking at where federal funds rate futures Implied probabilities put rates at the end of the year and as you can see here There's about a 16 percent probability that markets are expecting rates might remain where they are exactly today So never mind no cut today no cut for the rest of the year Obviously the further out down a timeline you go the more risk there are to the accuracy of these numbers Because obviously between now and the end of the year there's lots of things that could occur to change the situation But the way markets are priced today, which is important for Accentaining the reaction function of how assets will move at the initial announcement tonight It's actually 41.5 percent the most likely that rates will just be one cut lower than where they are today a range of 1.75 to 2 percent so yeah quite interesting to see how this is shifted and of course we get the summary of economic projections Later and then we get the press conference as well So as I said we'll cover that in full, but it's going to be particularly interesting Markets right on the fence about what exactly that the initial rate decision is going to be this evening The other thing of course you might have heard about Quite a lot of people been talking about this chart If it if it looks frightening, that's probably because it is frightening. It's the US overnight repo rate and it surged Beginning of the week it kind of back-to-back did it again yesterday Typically the repo rate is something which kind of trickles along as you can see here over the last two months At around the federal funds rate, which is that say 2% But it's more than five times higher than that as of yesterday hit 10% now I Did send out to you guys this morning and explain our article about what is a repo rate because I've had a quite a Questions yesterday not a lot of people who are new to markets are too familiar with this process but it is an absolutely pivotal and essential operational kind of option or part of how markets function day today and So what I thought I'd do I'd quickly run through a couple of headlines of what exactly this is just so we're all on point Because the Federal Reserve are going to be looking to add more liquidity to the system later today So when you see those headlines, you're just a little bit more informed about what is going on So the repo rate talks about Essentially cash available for banks for their short-term funding And as you can see then as kind of like with the libel rate if you remember back to financial crisis or the interbank lending rate Once these rates start to spike higher. It means then that it has an inability for Lenders to lend to one another because you get this kind of credit crunch if you like And so we've had this big surge, which means liquidity dries up now That's a big problem because banks need liquidity in order to meet their daily operational needs and maintain Sufficient reserves just day-to-day So what happens as a process is that Wall Street banks? They offer us treasuries and other high quality securities to raise cash More often or not overnight to finance their trading and lending activities because remember financial institutions are not Just trading markets as only one very small part of what they do. The other big part is lending activities To a variety of different market participants including other banks, of course What happens then is the next day so after they've They basically offered these These assets or collateral to raise cash overnight the next day borrowers repay their loans Plus what it typically is a nominal rate of interest to get their bonds back So a nominal rate normally would be 2% in line with the federal funds rate But if it was 10% well, then wow, there's no way Then you would offer to lend that money knowing that you've got to pay back then a 10% premium on it Which is five times more than your regular amount So what happens is this is a massive risk to markets in terms of the day-to-day operational functions of the banking system and So it forces the Fed to intervene to add emergency liquidity in an injection that they did yesterday a 50 billion dollars Now is this the first time that the Fed have had to do this? Absolutely not. They were very active I remember doing this during the Right in the middle of the severity of the global financial crisis back when Lehman's collapsed as you can imagine Banks were woefully short of liquidity No other institution wanted to lend to another counterparty So the Fed had to add liquidity day after day after day if you bring this into our own all those slightly different System this is when RBS had what a hundred billion pounds short for in meeting its overnight obligations Which is when then Obviously the government had to step in the central bank adding short term the quality in the government taking ownership of the bank at that point so Yeah, this Is it shocking news? Is it gonna move all different assets? No, is it a Factor that could well be brought up in the Q&A with the Federal Reserve Chair Jerome Powell today. Yes Is it something to monitor going forward? Yes so it definitely could if it becomes a Continuous thing that that gets seen every day that means it's another thing that the Fed are gonna have to throw some monetary power at and obviously it does require large amounts of funding So they're looking to conduct another one today and reportedly that's gonna be another 75 billion dollars now The question might well come Why is this happening? Well, there's three main reasons that people from what I've read are pinning this on from this morning, but it is somewhat debatable Number one is corporations had to withdraw funds from money market accounts to pay quarterly tax bills So if you think about the actual Participants within what makes this repo market function They're there with liquidity is drawn down because of the fact that they've had to make a a seasonal quarterly tax bill payment That also coming on the same days when last week we had 78 billion Treasury kind of funding round from the US Treasury That means then that all of those banks and investors who bought into those bonds that were sold by the US government Last week now have to settle up. So again, we're drawing more liquidity from the system as they make those payments And then finally reserves that banks part with the Fed are often made available to other banks on an overnight Basis are at their lowest level since 2011 So again the amount of reserves generally that banks have available to them to lend to other Institutions is the lowest it's been in about eight years This has come as the Fed have tried to cull a lot of its vast portfolio of bonds that they've Accumulated over the last few years through the three phases of quantitative easing post financial crisis So all of those three things all equate to withdrawal of liquidity But importantly they've all come right at the same time the latter point probably has been ongoing But the Treasury funding round from last week in addition to the quarterly taxable payments for corporations has led to this funding Squeeze and consequently this repo rates surge Do I actually think this will be become a bigger thing? No, but what it does actually Entail though is probably in time some tweaking of monetary policy when we start looking at the more complicated Details outside of just normal interest rates and dot plots and so on that they're going to have to change because That this this funding situation is fairly pressured At the moment and we'll probably like to continue to do so for some period of time So some changes do need to be made technically to how they operate Okay, hopefully that makes sense And that's a bit more clearer on what exactly that is Final thing just to finish off on my side. I did read this this morning Looming it looming election in reference to the UK is set to delay the appointment of Bank of England governor So Mark Carney could be asked to extend his tenor again. I think this would be the third time There are other articles on the FT talking about who could be his replacement Andrew Bailey or Ben Brauben or Lots of others as well But the point being is that obviously we're coming to this pivotal point of where Brexit could well be delayed again To the end of January of 2020 And so I guess what really would be would be the most prudent thing to do from a Planning point of view is have some degree of continuity. So if Carney were to stay I think that would be the best course of action from a Bank of England's job of market stability point of view But if they were to change then all the more reason why I think they should select someone more organically Perhaps someone like Ben Brauben Because he has been part of the top-level decision-making through the process and he'll know the kind of tact and Guidance that very closely that Carney has been deploying Okay, calendar wise today, and then I'll hand you over to Sam What have we got so UK CPI data is coming out later this morning? Could that be market moving? Well, sure it could be but Only would I would say if it was way out of the Consensus estimates we've got a range of 1.6 to 2.2 at the high the expectation year-on-year is 1.9% so I Would watch that I certainly would say stay clear of having any position on while the data comes out, but Yeah, it would need to be down at the 1.5 percent kind of reading or up at the 2.4 percent I think really to see a decent move in markets just because Everyone's sidetracked by political on goings UK wise and the Fed decision looming dollar wise CPI comes a lot of course alongside RPI and PPI So all at 930 then get your zone final CPI So again final readings likely to not move the market then for that reason this afternoon US building permits housing starts for August Canadian inflation data weekly Oil infant trees, so I will post those API numbers into the chat room I'll get Sam to cover those in a second And then you've got the FOMC decision, of course happening later on with Fed chair power to back that up with the press conference 730 But again, we'll recover that 630 we go live on YouTube, so hopefully you can join us There will be a chat function the ability to ask questions as well So happy to help kind of guide you through that volatility when the release comes out Good stuff. All right, hand you over Sam, and I wish you a good day ahead until that time. Thanks very much Yeah, hi guys, hope we're we're all doing well and ready for This evening so we've come on the mic closer to the time And then on on YouTube as well We'll go through some of the levels of how we're trading going into the event before we get on to The main dollar related markets We'll have a quick look over at oil which you can see a couple of times really, you know how to how to go at trying to break through the The low that we we've had and we reached on on Monday morning So that being the the high that we had back on the 10 So the 10 31st story. Yeah, and then it was the 10th wasn't it? That held well and since then we've had another go at trying to break through some of these levels and just can't get Get down there for that gap feel, you know, obviously looking at this more technically as well I think that's gonna remain to be a trade opportunity if we were to potentially get the Maybe the DOE's overly bearish, you know, you could get through there If you have some big dollar strength as well that could come through later on and and obviously it's a big big push down to where You finish Friday around 54 85 on the futures last night's D oe numbers coming in or the headline which was expected to be a draw of Minus 2.5 coming in at a build of just over half a million 592 Cushing was a draw of minus 846 gasoline a build of 1.6 mil and distillate build as well We have a look at the that So I'll have to zoom in here and it's a standard Sort of API sized candle you can see here so relatively small relatively contained slightly mixed On the on that reading there of course bigger things going on at the moment Just the way oil is looking obviously talking about that gap feel if you like but also you can see just from this morning We're starting to to get that trend to the upside and oil like gold is one of those markets That when you do get a strong trend developing in the morning It offers a good opportunity for that break through To the downside as well looking at some of the levels from from yesterday and around the pivot and sort of $60 you got yesterday evening's sort of resistance on the pivot, which looks quite good And not that we're gonna get up to that R1, but you can remember yesterday We were talking just about the the neckline if you like from the what was the the double top Obviously we've moved contracts here. So it looks slightly different now But that break of that of course coupled in with the the Saudi headlines or a decent push to the downside So a couple interesting levels to have marked up there for oil currency wise to have a quick look Just where we're trading. I'll put this on a 240 chart you can see the euro here again It's a market that's couldn't like the pound break that low and we couldn't then again to the upside get above some Resistance that we have back on the 29th sir. So we're sort of stuck within this range from 110 11 to 1180 which you know ahead of a central bank a meeting of this significance isn't all too Surprising to be honest and you can see over the last but let's put this on back to a 60 You can see over the last sort of couple of sessions We're just getting started to again develop different trend lines from these highs and you can see Relatively well respected to to that side there So looking maybe break of there yesterday's highs and then you're looking at the the highs of the week To the downside you've got some interesting levels just below I would say the the pivot where we've had decent price action around 111 14 So as a line in the sand for the morning, it's not too bad But really I would be more focusing on and just sort of holding off and waiting for Really this evening. So in the build up 6 30 to 7 o'clock When the headline comes out and then obviously the press conference 30 minutes later really just be Prepping for then if you like other key levels to be aware of just to the downside again Just below that s1 previous high of yesterday and I also do quite like the look of what was yesterday's low And also the low the 11th. I mean, that's a pretty key area to have on as well pound. Obviously with the Fed later You know the pound is gonna move but probably not to the extent that You're a dollar is it's still gonna be Brexit the main driver here focus, right? And so should be elsewhere and and yesterday's low We we got a test just after the briefing really of the level we were talking about and that is those high from the ninth And all the other highs as well and the retest of that trendline. Obviously was something that would probably be You know to be discussed at a later event that coming in at s1 today But for now good support held up there and now you could also argue Now if we were to get any further push below this pivot and 125 Taking into account the highs that we had from overnight yesterday and yesterday morning Which comes in just above the s1 so some nice support just below We're trading the failure really to to break above that the high that we had on the 13th on Friday As seen our strip lower if we put this onto the 15 minute You can see as well just haps at some point. We're gonna start to make this other trend here As well to keep a watch on as with any brake lower in the morning. You can see here. We're having on that trendline as well That's where the move just on the open really pushed lower So a retest of that is of course something to have marked up so rather than maybe Attacking the pivot even though technically it's not too bad. I prefer to look to get short a bit higher up on that S&P Really, I mean yesterday was pretty quiet on the s&p the range from the the high to the low pretty small 93 to 0 9 to 16 points You know, maybe we would have loved that back in 2017 But it's all got used to the s&p actually really moving now that gap feel was really taking place though of course and From overnight on the weekend. We couldn't really you know push lower at all and you can see again This trendline worth having on from the low that we had back on Monday as well Just to really get things squeezed in if we can get a confirmed break above 0 9 Then you know, why can't we get the highest from last week where we obviously got very big resistance level? You know, I've seen some tweets yesterday that people are Reckoning we're going all-time highs today just the way we're priced in and the unwinding of this rate cut and you can see Have a look at this that longer term chart with the all-time high in the mix. You can see how close we are percent wise roughly do this as 0.9 So I could easily do that in a day Can the same levels as usual to the downside of see that the 46 to have up and then this trendline that we're Starting to get starting from the 10th of September But as mentioned, we'll go through all of these in more detail ahead of the time As this morning I would prioritize more a case to sort of prep in and planning for the session ahead obviously got the UK data out at 9 as well But the main focus is going to be elsewhere gold as well You can see quite choppy quite range bound that obviously the lows that we can call it 1494 Very key, but also here. I was looking yesterday with the the new guys in in stage one The career program and just talking about the significance of this whole area You can call it 89 to the 93 94 point is such good support You know a break of that later and you know no rate cut and potentially a bit more hawkish on the press conference and Projections could really see us pushed down and I I think we could have quite a quick move down to sort of 68 and and 60 So certainly a key zone that I would have marked up on the flip side, you know if they were to Go more down the the dubbish route, you know key Resistance level to the upside at 1525. I don't think it's out the question that 89 or 25 gets tested today. I think it could be a really good meeting So please do join us later on just having a quick look over the bund you can see pushing up This morning. So we're having this trend line drawn on from the last couple of days It's probably not far off, you know getting tested with Sort of the lows that we had back on Friday and we'll see the high of yesterday as well T-notes following suit up to it's high after we said it was the worst week since November 2016 we have just been drifting very well for even seeing if there's a bit of a trend channel on this at some point If we were to make another low So bonds just pushing to to the upside there any questions as usual, please do let us know I hope you'll have a good day and and feel free to join us later on in in what should be a Pretty good meeting