In the evening markets will get familiar with the November FOMC decision on interest rates and monetary policy statement. Although expectations for increases in November are very limited, some observers note that the market believes that the Fed may again surprise us.

What are we waiting during Wednesday’s session?

European morning runs under the banner of publication of PMI for the euro zone. All results are below:

At 13:15 ADP will release its October report from the labor market – employment change according to forecasts should increase by 165,000 jobs (compared with 154 thousand for September). ADP is closely followed by the markets, since it is often a predictor ahead of of reading Friday’s NFP – one of the most closely indicators tracked by the markets (and the Fed).

Before the Fed meeting summary – at 15:30 we will know also the change of oil stocks in the US. Publication in recent months strongly differed from the market forecasts, which translates into a short but very dynamic changes in the value of the Canadian dollar and WTI / Brent.

The main event of the session, however, will be at 19:00 a summary of the November FOMC meeting. While the valuation of interest rate increases on Wednesday evening is very small, the markets are counting on even stronger guidance on the desire to make a move on rates in December.

Markets want to hike in December?

Opinions regarding the Wednesday’s FOMC meeting are mixed. The main consensus presupposes the following demands:

• FOMC decides not any serious decision in connection with the upcoming presidential election
• When the agenda is missing press conference – like today – the Federal Reserve does not usually announce the most important decision
• Investors are awaiting confirmation of the December interest rate hike
• The December increase – the second in the last decade since the Great Financial Crisis – should be small and be most likely of 25 basis points
• Under current conditions, however, it will be a very important movement performed by the Fed, which coincides with the current opinion regarding the status and development of the local economy.

The Fed would have to see and to present a really strong arguments to change the market expectations for the December increase. On Tuesday evening, futures tracking the expectations of traders increased to 60.8% probability of such a move at the end of the year.

Last year, the Federal Reserve has used the November meeting to communicate the desire of the December increase. Today we can look forward to a mirror image. During European morning, the dollar continues to weaken against the euro, continuing yesterday’s dynamic appreciation. On the daily chart, we see that the price returns over the June-July’s lows (pin-bar D1 above 1.0950 gave the signal to the dynamic growth). EUR/USD easily defeated the round level of 1.1000, and at this moment is coming to the lows of September, which, combined with 1.1100 will be an important resistance before the meeting of the FOMC. If the markets will hear a clear indication as to the rate hike in December, the Eurodollar should change direction to south: