Market View

[Yousuf Ali]

The FOMC decision was, as expected, an on-hold one. The statement, too, was little changed, although markets made a microscopic change of any tweaks in the language.

The key changes singled out were (1) the elimination of the word "recently," referring to the decline in inflation, suggesting there's some concern the weakening will be more long lasting; and the removal of the word "somewhat" from the phrase describing that inflation is "running somewhat below 2%"; and (2) regarding tapering. The FOMC said it expects to begin normalising the size of its balance sheet “relatively soon”, compared to “this year” in the previous statement. implicitly the chances of a September rate hike are close to nil and deferring until December."

[Yousuf Ali]

The U.S. economy is expected to show an improvement in the second-quarter, with the release of preliminary GDP figures due Friday, as economist forecast GDP grew at an annualized rate of 2.5% in the second quarter from the first, when it increased just 1.4%.
The GDP data comes a few days after the Federal Reserve stood pat on interest rates, leaving its benchmark rate at a target of 1.00-1.25% while expressing concerns about the slowdown in inflation.

[Yousuf Ali]

The DXY was lower while the ten-year US benchmark -0.08% in a range between 2.2711% - 2.3031%. US data was mixed and second tier while most of last week's poor performances were still casting a dark cloud over the US economy in the eyes of traders.

In stark contrast, European data and CPI made for a higher euro. 1.1845 was the fresh high for the year. Sterling was also on a tear, making a high of 1.3204 offered. The yen took advantage from a weaker dollar as well and was eyeing a break of the psychological 110 handle, The Dow Jones printed a fresh record high of 21,927.30 and held up the yen's advance.

Metals were well bid again and offered the commodity bloc a lift with the Aussie testing on the 0.80 handle ahead of today's major risk event in the RBA and possible jawboning in respect to the value of the Australian dollar; AUDUSD pair too high for comfort for the RBA? The Kiwi moved into a phase of consolidation mid morning until making a break higher back onto the 0.75 handle. The USDCAD pair lost the 1.25 handle on a sell-off to 1.2431 with WTI spiking to $50.53, continuing with its bullish tone.

[Yousuf Ali]

European politics, citing that Catalonia is expected to approve plans for an Oct. 1 referendum on whether to declare independence from Spain.

Catalan lawmakers are due to vote on laws approving the referendum and the legal framework to set up an independent state.

Polls in the northeastern region, whose capital is Barcelona, show support for self-rule waning as Spain’s economy improves.

But the majority of Catalans do want the opportunity to vote on whether to split from Spain.

Under the terms of the new laws, the Catalan parliament will declare independence within 48 hours of a ‘yes’ vote.