• Will the better-than-expected US recovery mean the FOMC does not need to be as dovish, especially if Congress’ relief package still lies ahead…
• …or will the central bank be concerned about the lack of a relief package so far and the risk that the winter months may bring another surge in Covid-19 disruptions?

Base metals
Three-month base metals prices on the London Metal Exchange were mainly in positive territory this morning, the exception was nickel that was down by 0.1% at $15,230 per tonne. Tin was little changed at $18,230 per tonne and the rest were all up by 0.3%, with copper at $6,778 per tonne – overhead supply above $6,800 per tonne seems to be capping the upside for now.

While the base metals’ performance on the LME was generally positive, the most-traded base metals contracts on the Shanghai Futures Exchange were more mixed, with October copper and lead and November nickel all lower by an average of 0.4%, with copper down by 0.6% at 51,850 yuan ($7,642) per tonne. While October aluminium and zinc and November tin were up by an average of 0.3%

Precious metals
The spot gold price was up by 0.3% at $1,961.33 per oz this morning and after consolidating within a triangle since early-August, prices tried to break higher on Tuesday, but have run into overhead resistance – the market is likely to be choppy ahead of the FOMC decision.

Spot silver and platinum were both up by 0.7% at $27.31 and $979.50 per oz respectively, while palladium was down by 0.7% at $2,392.30 per oz - palladium’s bucking of the trend comes after a 4.2% gain on Tuesday.

Wider markets
The yield on US 10-year treasuries was recently quoted at 0.67%, unchanged from where it was at a similar time on Tuesday. The US treasury yield seems quite stable, suggesting the market is also waiting for direction from the Federal Reserve.

Asian-Pacific equities were mixed this morning: the CSI 300 (-0.57%), the Hang Seng (-0.09%), the Kospi (-0.38%), the Nikkei (+0.06%) and the ASX 200 (+1.02%).

Currencies
The dollar index was consolidating this morning and was recently quoted at 93.05, it was at 92.87 at a similar time on Tuesday – the range so far in September being 91.73-93.66.

With the dollar treading water, most of the other major currencies were doing the same this morning: the euro (1.1846), sterling (1.2896) and the Australian dollar (0.7319), but the yen (105.28) was strengthening.

Key data
Today’s FOMC rate decision, statement, economic projections and press conference will be the main focus today.

But ahead of that there is a barrage of price data out of the United Kingdom and trade balances from Japan and the European Union.

US data includes retail sales, business inventories, National Association of Home Builders (NAHB) housing market index, crude oil inventories and Treasury International Capital (TIC) long-term purchases.

Today’s key themes and views
Overall the upward trends across many asset classes appear to have run out of steam but prices are holding up well and dips continue to attract buying, suggesting “the trend is your friend”, but we also know markets do not move in straight line forever. Given the rallies since March have been heavily driven by a liquidity, today’s FOMC stance is therefore likely to be all important to market sentiment.

If there is a negative reaction in markets to the FOMC’s stance and a correction unfolds, we would still expect the underlying bullish themes focused on infrastructure to provide physical support to the base metals, albeit at lower price levels.

We expect gold prices to be choppy today until the FOMC statement.