There’s one event on everyone’s mind for next week: FOMC. The Federal Reserve will meet on Tuesday and Wednesday to discuss its monetary policy in the midst of a build-up in fundamental anticipation. The central bank has been facing a surge in prices for some time but the latest CPI reading showed the peak in prices may have passed, something Powell has been adamant on since prices began to spike up at the beginning of the year.
And so investors are now faced with a dilemma: the Fed has said there needs to be two conditions met to start tapering assets. One is the jobs market, which has continuously disappointed with fewer jobs than expected being created as vacancies shoot up. The other is inflation, which had met the necessary conditions for a while, but now seems to be coming off slightly. And with the Fed being known for playing down the demand for slower asset purchases and higher rates, it wouldn’t be crazy to assume that investors are slightly apprehensive about the central bank actually delivering at this meeting.
The stock market has been keeping its cards close to its chest with tight ranges heading into this coming week, even having picked up some negative sentiment along the way in the likes of the Nasdaq and the S&P 500 after months of continuous outperformance. I wouldn’t be surprised if we see some further weakness at the beginning of the week as investors position themselves for a possible outcome where the Fed stays on the hawkish side, reducing liquidity in markets and causing stocks to selloff.
All eyes on the Fed on Wednesday as investors weigh on chances of a taper announcement
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