Activity picked up considerably mid-morning after a sluggish start.
Currencies
Despite the FED rate hike fully baked in, currency traders have gone through their there ceremonial jockeying for position ahead of this critical announcement given the markets outsized focus on tonight’s FOMCs. While volumes have been higher than average, most G-10 currencies have been confined to tight ranges none the less.
FOMC
While investors are treating another Fed rate hike as all but certain on Wednesday, the outlook for future policy as signalled by the dot plot and any comments from Jerome Powell will be essential to whether US bond market yield push higher. But with the US economy galloping along quite nicely, it difficult to envision a dovish lean despite investors concerns about inverted curves or fiscal policy fatigue in 2019
Asia
Asia equity markets had traded defensively in the afternoon session giving back early morning gains where sentiment was perked when MSCI announced they’re considering increasing the weighting of China A shares. And with an FOMC main event on tap tonight, position squaring is dominating market sentiment.
Italy
However, trading desks are abuzz with the latest terminal headline that suggests Five Star Movement, one half of Italy’s emergent coalition government, is threatening to tank the country’s upcoming budget unless it gets full backing for its flagship benefits plan. Indeed, this could throw a huge monkey wrench into the works, and worth paying close attention to as the trading day progresses.
Gold
The precious complex continues to consolidate ahead of the FOMC, and in the absence of any haven appeal, most Gold dealers and market speculators are left watching the US dollar for direction. And since even the most astute G-10 traders are struggling for dollar direction, gold remains mired in no man’s land, smack dab in the middle of the well worn $1190-$1210 range.
Oil
Oil prices remain very much supported in Asian markets as most of President Trump’s overnight US headline bluster directed at OPEC was largely ignored. But, bullish bets are being held back by the larger than expected API inventory builds as the more definitive DOE Weekly Petroleum Status Report at 10:30 AM EDT on Wednesday is on tap. And while there is bearish tail risk surprise if the DOE confirms the API build; however, Oil prices remain in the Bulls domain amid concern that US sanctions on Iranian crude oil exports will result in much tighter physical market conditions, so I suspect any dips will be firmly supported.
