Cautious Markets Ahead of FED Announcement

By Tim Michaelides | Recorded 4:00pm, 20th September 2017

The Australian market continues to consolidate in a channel pattern between 5800 and 5650. Today the XJO sold off strongly in early trade despite strong offshore leads but rebounded to close just above the 5700 level. The Dow and the S&P500 broke into all-time highs and continue to slowly edge higher. Overnight we saw Donald Trump give a speech to the UN where he vowed to "totally destroy North Korea" if the US and its allies were forced to defend themselves. Most world markets are becoming somewhat used to the North Korea missile tests and threats.

The focus is now set on the FED announcement tomorrow morning, where they are expected to announce the start of the reduction of the central bank's $4.5 trillion balance sheet, and no change to interest rates. Fear seems to be low in markets with the VIX and XVI volatility index sitting towards lows, the AUD/USD is hovering around the 0.80c, the USD continues to weaken with the view that the US FED is unlikely to increase rates again this year, as the RBA remains fairly neutral holding the cash rate at 1.5%.

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