EC Markets Mark Time Ahead Of Fed

Overview: Short-covering ahead of the FOMC's outcome tomorrow appears to be lending the US dollar support today. It has extended yesterday's gains against the euro, sterling, and yen. Among emerging market currencies, the Turkish lira, along with the South Korean won and the Taiwanese dollar, lead the few advancers. In contrast, the South African rand and eastern and central European currencies are dragged lower by the heavier euro. Ahead of the $62 bln seven-year auction and $28 bln two-year floater, the US benchmark 10-year yield is firm around 1.58%. Yesterday's auction results were acceptable, and the market barely reacted. European bond yields are also a little higher as well. Equity markets are mixed. Except for China and India, most bourses in the Asia Pacific area slipped, while Europe's Dow Jones Stoxx 600 is directionless.US futures are sporting small gains. The weaker dollar and firmer rates appear to be weighing on gold, which was turned back from $1800 last week. Oil is building on yesterday's recovery ahead of the outcome of the OPEC+ monitoring committee. Yesterday, its technical panel revised up global demand this year by 6 mln barrels per day but was cautious given the pandemic's toll in India and Brazil.  

Asia Pacific

The Bank of Japan left policy on hold as widely expected, and it offered minor tweaks in its forecasts, which it extended to FY23.  It raised its growth forecast for this fiscal year and next (now midpoint is 4% this year and 2.4% next from 3.9% and 1.8%, respectively). However, the inflation forecast for this fiscal year to 0.1% (from 0.5%), and for the first time, the BOJ admitted it will not achieve its 2% inflation target during BOJ Governor Kuroda's term that ends in April 2023. The cut in this year's inflation forecast was attributed to Prime Minister Suga's effort to cut mobile phone charges. Tomorrow the BOJ will announce its planned bond purchases for next month. 

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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