(Bloomberg) — European stocks and US equity futures posted small moves in cautious trade before the Federal Reserve’s policy decision later Wednesday. Turkey’s lira plunged more than 10% after authorities detained President Recep Tayyip Erdogan’s most prominent rival.
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The Stoxx 600 edged lower in Europe, with most sectors in the red, while contracts for the S&P 500 and the Nasdaq 100 kept to narrow ranges. A regional Asian share gauge erased an earlier advance. The dollar strengthened and gold rose to a new record.
Turkey’s lira weakened to a record low past 40 per dollar, a selloff in the country’s stocks triggered a trading halt and government bond yields surged to the highest level this year. The dramatic declines followed the detention of Ekrem Imamoglu, who’s the mayor of Istanbul, in a move that could bar him from challenging Erdogan in the next presidential election.
The Fed is expected to hold interest rates steady and its quarterly dot plot should give investors more insight into the outlook for the economy. Traders will also be focused on Fed Chair Jerome Powell’s press conference and his juggling act between communicating the central bank’s current view of the economy and weighing the potential impact of President Donald Trump’s trade policy.
“Amidst a deteriorating economic backdrop caused by tariffs and general trade uncertainty, the markets are looking for the proverbial ‘Powell put,’ hopefully expressed in dovish guidance and a lowered dot plot in the updated Summary of Economic Projections, said Kyle Rodda, a senior market analyst at Capital.com.
Options traders are pricing in a 1.2% move in the S&P 500 in either direction on Wednesday — up from an average of 0.8% for Fed days over the past year, according to data from Stuart Kaiser, Citigroup Inc.’s head of US equity trading strategy.
“Historically, Fed days when rates have been left unchanged have tended to see solid gains,” Bespoke Investment Group strategists said.
The yen steadied after hitting an intraday low against the dollar as the Bank of Japan kept rates steady and signaled concern about the impact of trade tensions on the global economy. Traders also tracked Kazuo Ueda’s press conference Wednesday afternoon, where the Governor said that the trend in consumer prices continues to rise, but it’s still below the central bank’s 2% target.
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